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Buying a second property in Singapore

Buying Second Property in Singapore and How to Own 2 Properties Legally

Why Are People Obsessed With Buying a Second Property?

If you remember, it was popular several years ago to sell one property and buy two properties. It was during a period when private properties were relatively affordable and a couple could “decouple” from their HDB by taking one name out from the ownership thereby allowing the other spouse to purchase a private property. 

This loophole has since been plugged but there are still perfectly legal ways to own two properties without running afoul of the law. 

1. Buying Second Property To Hedge Against Inflation

During inflationary periods, real estate prices historically keep up when adjusted for inflation. Construction materials, labour and land costs increase in tandem. Rents also tend to rise along with prices when there is high inflation, enhancing the appeal of renting out properties attractive to investors.

2. Can I Own Two Properties In Singapore?

Yes, you can own two properties or more properties if you currently own a private property. This however comes with higher costs from Additional Buyer’s Stamp Duty (ABSD) and tighter loan restrictions. 

If your current property is purchased directly from the HDB such as a BTO Flat, Executive Condominium (EC) or a Resale HDB Flat, do note that you have to complete the Minimum Occupation Period (MOP) applicable to your case. 

If you are a Singapore Permanent Resident (SPR) who owns an HDB flat and you intend to buy a second property, you must dispose the existing HDB flat within six months of buying the new private property.

For a Singapore citizen looking to purchase a private residential property, you do not have to sell your HDB or EC and can concurrently own two properties. You must however fulfil the MOP requirements to be eligible for buying second property.

Those who are currently private property owners and intend to purchase a Resale HDB Flat must dispose of their private property within six months of acquiring the new property or subject to the prevailing cooling measures. For purchase of a BTO Flat or New EC, there is a wait-out period of 30 months after the date of disposal of your private property before you can apply for the purchase.

Please always check the prevailing regulations from the competent authorities. 

3. Is It Worth It To Buy a Second Property?

Today with rising home prices, parents are worried whether their children is able to take on the purchase a property on their own in the future. Hence parents tend to assist their children with the downpayment and loan instalments for the property purchase.

The Return On Equity (ROE) for owning a second property for investment also appeals to property investors as they know that a mortgage loan is the cheapest form of borrowing you can obtain from the bank. This allows them to leverage to earn recurring rental income and exit when the opportunity arises for capital gains. It is imperative to do your financial calculations and prepare an exit strategy for optimistic and worst case scenarios. 

Buying second property however requires careful analysis of Singapore’s long term planning, the growth potential of the area, the transaction volume, competition and more. Consult us for a customised home planning today.

4. How Affordable Is It To Own Two Properties?

The Singapore government is closely attuned with the property market and is proactive in introducing measures to ensure that property prices do not run ahead of fundamentals such as wages.

UBS Property Bubble Index 2023
Source: UBS

In the UBS Global Real Estate Bubble Index Report 2023, Singapore is ranked 19th with a score of 0.47 indicating a fair-valued property market. This compares to Zurich, which is ranked the city with the highest bubble risk score of 1.71.

The most sought-after destinations in recent years are Singapore, Dubai, and Miami. In those hotspots of international demand, rental and for-sale price growth clearly stand out. Prices are up as much as 40% and rents 50% higher than two years ago.

Singapore’s housing supply cannot keep up with strong local and international demand, which began rising significantly in 2018. Real prices have risen by 15% since then, despite regulatory tightening. However, this has been put into perspective by rents, which have shot up by roughly 40% in the same period. Overall, the housing market is fairly valued, in our view

5. Buyer’s Stamp Duty

You would need to pay Buyer’s Stamp Duty when you purchase a residential property. The amount you have  to pay depends on the purchase price or market value of the property. 

Current rates are reflected in the table below:

Purchase price or market value of the propertyBSD rates for residential propertiesBSD rates for non-residential properties
First $180,0001%1%
Next $180,0002%2%
Next $640,0003%3%
Next $500,0004%4%
Next $1,500,0005%5%
Remaining amount6%5%

6. Additional Buyer’s Stamp Duty For Second Residential Property Purchase

You would need to pay ABSD when you buy a second residential property. The amount you have  to pay depends on your profile.

The ABSD was last adjusted on 27 Apr 2023 as part of measures to promote a sustainable property market. Current rates are reflected in the table below:

Type of buyerABSD rates
Singapore Citizens buying 2nd residential property20%
PRs buying 1st residential property5%
PRs buying 2nd residential property30%
Foreigners buying any residential property60%

7. Foreigners Buying Property in Singapore

From the above table, foreigners have to pay 60% ABSD from their first and subsequent property purchase. There is however exemptions for foreigners of certain nationalities which they are accorded similar tax treatments as Singaporeans. Do click on the link to learn more if you are a foreigner looking to buy a property in Singapore.

8. Property Tax For Owning Two Residential Properties

The Property Tax rates for both owner-occupied and non-owner-occupied residential properties will be revised in 2 steps starting from 2023.

Rates for owner-occupied homes with an annual value in excess of $30,000 will be raised – ranging from 5 percent to 23 percent in 2023, to 6 percent to 32 percent in 2024. If your owner-occupied property has an annual value of S$40,000, the annual property tax payable is S$1,480.

For non-owner-occupied homes, which includes investment properties – taxes will be hiked across the board: from the current 10 percent to 20 percent, to 11 percent to 27 percent in 2023 and 12 percent to 36 percent in 2024. If your investment property has an annual value of S$45,000, the annual property tax payable is S$6,600.

9. How Much Can I Borrow To Purchase A Second Property?

There are 4 key points to take note when it comes to financing your second property. They are namely the minimum cash down payment, allowable CPF usage amount, LTV and TDSR.

There are 4 key points to take note when it comes to financing your second property. They are namely the minimum cash down payment, allowable CPF usage amount, LTV and TDSR.

10. Downpayment For Buying Second Property

Your first property purchase requires only up to 5% cash down payment if you took up a bank loan but with an existing loan, your second property requires a 25% cash down payment of the property’s valuation limit. Given a property that’s valued at S$2 million, you’d need S$500,000 cash for down payment.

11. Loan To Value Ratio (LTV) For Second Property Loan

For your first housing loan, you are eligible to borrow up to 75% of the property value if you are taking up a bank loan or 55% if the loan tenure is more than 30 years or extends past age 65. For your second housing loan, your loan-to-value (LTV) ratio drops to 45% for loan tenures up to 30 years. If the loan tenure goes beyond 25 years or your 65th birthday, your LTV drops to 30%.

12. Total Debt Servicing Ratio (TDSR)

The Total Debt Servicing Ratio (TDSR) framework was introduced on 28 June 2013 to prevent home buyers from borrowing too much to finance the purchase of a property. Under the framework, home buyers can only borrow to up 55% (revised on 16 Dec 2021) of their gross monthly income. The limit includes all outstanding debts you may have, like car loans, personal loans and credit card balances.

If you have a home loan tied to your first property purchase, it can greatly affect the amount you can borrow for your second home. However, if you have already cleared the mortgage on your first home, then you’ll just need to ensure that your monthly housing loan repayments plus all other monthly financial obligations do not surpass 55% of your monthly income.

13. Allowable CPF Usage

CPF can be used to buy a second property. However, if you have already used your CPF for your first property, you may only use your CPF Ordinary Account savings for your second property after setting aside the Basic Retirement Sum (BRS). Savings in your Retirement Account (if you are above 55), Special Account and OA can be used to meet your BRS requirement. No further CPF usage is allowed thereafter. If you are below age 55, the BRS applicable to you is the current BRS.

There is a limit on the amount of CPF savings you can use to buy private residential properties at 120% of the valuation limit. Once you have reached the Withdrawal Limit, you will not be allowed to use further CPF savings, and you will need to pay the remaining home loan in cash.

14. How To Buy Second Property in Singapore Without Paying ABSD?

Most Singaporeans desire to build up their wealth with properties as they prefer to invest in tangible and stable assets in a politically stable country. Without the current cooling measures, it is hard to fathom what housing prices might look like today. 

There are a few legal ways to avoid paying ABSD and let’s explore them in detail:

a) Decoupling : This is a common method used by couples after they have built substantial savings or they intend to cash out the profits from their matrimonial home (usually a BTO, EC or new launch) to re-invest into two private properties.

You can also choose to keep your current property by having one co-owner take over the share of the exiting co-owner through a sale. This transfer of ownership will allow the exiting co-owner to purchase a second property.

However, there are additional costs (Buyer’s Stamp Duty, Seller’s Stamp Duty and legal fees) involved in decoupling. It is important to evaluate if it is even worth decoupling to meet your long-term financial goals.

b) Buying a property for your child : Parents can either buy a property under the child’s name who is above 21 years of age or buy it using a property trust structure for a child below 21 years of age. Since the child is legally the owner of the property, the parents become the trustee and thus responsible for paying the necessary levies (in cash only). The property will be recognised as the child’s first property and thus incurs no ABSD. Do note that a property trust structure comes with certain implications and restrictions – you cannot take a bank loan for the purchase of the property, ABSD (Trust) of 65% is payable as the property was purchased on trust for your child (remission / refund is subject to IRAS approval), if trustee is an owner or essential occupier of a HDB Flat, he/she must have completed the MOP etc. 

c) Buying commercial, industrial or overseas properties :  As the ABSD is only levied on residential properties in Singapore, you do not have to pay ABSD when buying commercial/industrial/overseas properties. However you have to do more due diligence when looking into these properties as the data may not be as readily available.

15. When Is The Right Time To Buy A Second Property?

This will depend a variety of factors as most Singaporeans start their property investment journey in their early thirties, when they have a stable income and can enjoy a longer loan tenor. It is prudent to speak to our real estate consultants to learn more about your options and to plan ahead.

16. What Are The Risks Involved in Buying Second Property?

When considering the purchase of a second property in Singapore, it is important to be aware of the potential risks involved. Understanding these risks can help you make more informed decisions and mitigate any potential challenges that may arise. Here are some key risks to consider:

a) Financial Risks: Buying a second property can involve significant financial commitments. It is crucial to carefully assess your financial situation, including your income, savings, and existing debts. Consider factors such as the down payment, monthly mortgage payments, property taxes, maintenance fees, and any other associated costs. Ensure that you have a realistic budget in place to manage these financial obligations effectively.

b) Market Risks: The property market is subject to fluctuations, and the value of your second property may decrease over time. It is essential to conduct thorough research and analysis of the market trends and conditions. Factors such as economic stability, interest rates, supply and demand, and government policies can impact property values. Consider the long-term potential for capital appreciation and assess the risks of potential market downturns.
c) Rental Risks: If you plan to rent out your second property, there are risks involved in finding suitable tenants and ensuring consistent rental income. Factors such as location, market demand, tenant turnover, and rental market conditions can impact your rental returns. It is advisable to conduct due diligence in evaluating the rental potential and seek professional advice to understand rental laws, tenancy agreements, and landlord obligations.
d) Regulatory Risks: Singapore has various regulations and policies related to property ownership, financing, and taxes. Stay updated on these regulations and be aware of any changes that may impact your second property purchase. Consider factors such as additional stamp duties for second properties, restrictions on foreign ownership, and compliance with housing loan regulations. Engaging a professional real estate advisor or lawyer can help navigate these complexities.
e) Maintenance and Management Risks: Owning a second property entails responsibilities for its maintenance and management. Ensure that you are prepared for the costs and effort involved in regular upkeep, repairs, and addressing tenants’ needs. If you engage a property management company, carefully evaluate their track record and services to ensure efficient property management.
 
f) Liquidity Risks: Investing in a second property ties up a significant amount of capital, which may limit your liquidity. If you encounter unexpected financial situations or need access to cash, it may be challenging to sell the property quickly without incurring losses. Consider the potential impact on your overall financial goals and have contingency plans in place.

Do you intend to buy a property?

You may be thinking what is the next step for you and if it is worth going through the necessary groundwork to buy a property.

When is the best time to buy and how can I purchase it at the best price?

Here at The Landed Collective, we specialise in residential properties and that means, HDB flats, Condos, Landed Houses and New Developer Sales. 

Before you start anything, speak to us for a complimentary consultation as we will provide you with comprehensive advice, run through the essentials on the property market and answer any questions you may have. 

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