Buying a House in Singapore | What to Expect in the Second Half of 2023

10 mins read • by Home Central

Buying a House in Singapore What to Expect in the Second Half of 2023

Purchasing a home takes a substantial amount of time and effort, and might even seem daunting – especially if it is your first foray into the market. If you are unsure of where to begin, these steps will help.

1. Market Research

Preliminary research may include price comparisons of units. Property listings can be found on sites such as Property Guru, iProperty, Gumtree, and SRX, among others. Scanning these websites will give you a rough gauge on the pricing and availability of properties with attributes you prioritise.

A few considerations to take into account during the shortlisting phase: How many bedrooms do I need? What is the layout and size of the unit? What kind of amenities are available in the neighbourhood? What kind of fittings have been installed, and are extra renovations needed before moving in?

While information is readily available online, there are several additional factors that make a significant impact on your decision-making. For example, the direction in which the unit faces will determine the amount of sunlight filtered into your home. Will there be harsh afternoon sun, or will there be sufficient sunlight to ensure a brightly lit space? Is the unit facing the main road? How much noise and pollution will you experience? Even getting to know your future neighbours will play a huge part in this important milestone. Make time to personally head down for a viewing along with a set of questions you may have for the seller.

If this is your first time purchasing a home and you are unfamiliar with the process, it is advisable to seek the assistance of a real estate professional. Hiring a real estate agent can save you a lot of time and work by allowing you to skip stages such as research, viewing arrangements, negotiation, home inspection, paperwork coordination, and closing the deal.

If you do not wish to hire an agent, doing it yourself works just fine as well. However, you will also be more vulnerable to risks. Having a professional accompany you on your journey may safeguard you from potential scams, as the agent is bound by a fiduciary duty to behave with reasonable care and attention. They are especially useful when it comes to law and regulatory obligations.

2. Organise Your Finances

Examine the various public housing grants available, as well as the amount of CPF money you can utilise and the amount of a loan you can acquire. You will be able to calculate the total cash outlay and how much you can afford to pay for a house from here. You should also think about your financing choices before applying for a loan.

It is crucial to organise your budget to avoid depleting your daily allocation and ensure that a sufficient amount of rainy day fund is available. This will aid in the smooth completion of the sale.

There are two loans you can take for the purchase of your home: a HDB Loan or a Bank Loan. Regardless of which path you may choose, the application for a HDB Flat Eligibility (HFE) Letter is required should you wish to purchase a Built-To-Order (BTO) or resale HDB flat.

So what exactly is the aforementioned HFE Letter? It is the compulsory assessment of a buyer’s eligibility for a resale flat purchase, CPF housing grants, and HDB housing loan. Before 9 May 2023, the assessment of these three criterias were made during different milestones in your property journey. The HFE Letter replaces the now retired Home Eligiblity Loan (HLE) Letter to provide a more holistic assessment and understanding of a buyer’s flat and financing options. In essence, it is designed to provide buyers with enhanced convenience during their flat purchase.

For private properties, you may choose to apply for a non-compulsory In Principal Approval (IPA) to aid you in mapping out your budget.

3. Option To Purchase

To kickstart your resale HDB hunt, you are required to register for a mandatory Intent To Buy, which is valid for 12 months. You should secure your desired unit during this period. 

Once you have decided on your dream home, you can start with an Option Fee, a payment made to the sellers in exchange for an Option To Purchase (OTP), an agreement that grants exclusive rights of purchase to the buyer, essentially binding both parties in a property transaction.

Prior to entering an OTP with a seller, buyers will have to check for ethnic quota, proof of ownership, seller’s bankruptcy status, and easements.

Buyers of HDB resale flats must ensure that they are within the proportion of the Ethnic Integration Policy (EIP) for their chosen block or neighbourhood. This can be carried out through the HDB portal.

Next, property purchases must always be made with the true seller. Remember to protect yourself by requesting proof of ownership. During this period, you may also check for the seller’s bankruptcy status, which can be done via an insolvency search on the Ministry of Law’s e-services portal. If a seller has declared bankruptcy, sales of private properties must attain the approval of their official assignee (OA).

Finally, all residential properties are entitled to a set of easements (support, way, light, shelter, electricity, and passage of water) – all of which can be looked up in the property’s title deed.

Once everything is good to go, an option fee of 1% of the unit’s price is needed to reserve it under your name. However, the option fee cannot exceed $1,000. Resale HDBs have an option period of 14 to 21 days, whereas the duration can be negotiated for private properties. During this time, buyers have to come to a decision on whether to go ahead with the deal. Failure to respond will nullify the agreement, with the paid sum forfeited and the reserved unit going up on the open market again.

4. Prepare All Important Documents and Additional Payments

With the OTP, buyers are required to submit a request for valuation to either HDB (resale flats) or the bank (private properties). All valuation is calculated based on surrounding property transactions, the unit’s floor level, and renovation works. If the unit’s selling price is above the valuation amount, the remaining amount has to be paid for in cash. This is known as Cash Over Valuation (COV).

Buyer’s Stamp Duty (BSD) is also required for the acquisition of residential properties. With effect from 15th February 2023, new changes to BSD rates were implemented for higher value properties.

Information courtesy of Inland Revenue Authority of Singapore (IRAS).

Furthermore, new revisions to the rates for Additional Buyer’s Stamp Duty (ABSD) were introduced. These changes will affect all foreign buyers (first property onwards) and Singaporean Citizens and Permanent Residents (second property onwards).

Information courtesy of Inland Revenue Authority of Singapore (IRAS).

Once you are ready to proceed with the property transaction, an Exercise Fee for resale HDB flats (which when included with the Option Fee, does not exceed $5,000) will have to be paid for in cash. Plus, you will also have to set aside a budget for other miscellaneous payments such as: administrative, conveyance and legal fees, and home and fire insurance.

5. Close the Sale

After all necessary documents and payments are cleared, you may arrange a date to collect your keys. Herein begins the moving in process and any renovation works you might want for your new home. 

These steps might seem a lot to take in at first, but don’t worry – we’ve prepared a handy summary checklist to guide you through your journey. Happy house-hunting!

For more property insight and advice, contact us at +65 9799 7955 for a free, no-obligation consultation session today.

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