Guidelines in buying property
As of 2012, there are more than 1.2 million housing units in Singapore. 76.3% are HDB flats (public housing), 16.8% are private flats, 5.9% are private houses, with the balance 1% being alternate housing types. This is before taking into account 96000 private flats and houses in the pipeline. Therefore, finding a home is never an easy task. This is where 83Property.com comes in. We are a team of licensed real estate salespersons under Council of Estate Agent Singapore with more years of experiences in the industry as your best assurance to the quality of services. Like most of the countries, housing are generally categorized into public (government) housing and private housing. Public housing are only available to Singapore Citizen (SC) and Singapore Permanent Resident (SPR) whereas most of the private housings are open for foreigners’ purchase. All buyers in Singapore are subjected Buyers’ Stamp Duty (BSD). Subsequent property is subjected to Additional Buyers’ Stamp Duty (ABSD).
The sub-categories of private housing are landed and non-landed. Only SC can buy landed property while SPR and foreigners will require approval from Land Dealing Unit (LDU) to purchase landed property. This is why non-landed private housing are of the highest demand because it is open for anybody to buy. Only in private properties, we are able to find freehold tenures.
Landed housing exist in the form of detached house (bungalow), semi-detached house, terrace house and cluster house. These properties comes with Land Title which foreigners or PRs are not allowed to buy unless with LDU’s approval.
Non-landed housing comes in the commonly seen condominiums, private apartments and townhouses. These properties are usually Strata Titles, hence allowing foreigners to own.
The sub-categories of public housings are Build-To-Order (BTO) flats, Design-Build-Sell-Scheme (DBSS) flats and Executive Condominiums (EC). The common used syncronym for flats are ‘HDB’. All public housings are sold new with 99-years leasehold.. Therefore, when buying resale, buyers have to take note of remaining lease term as it may affect the loan tenure limits or borrowing limits.
AREAS OF CONSIDERATIONS
Some of the things you need to consider before purchasing a home are:
• Commuting plans
• Type of property you are looking to purchase
• Additional facilities
The most important question to consider is: what is your budget for purchasing a home? This will help you in determining the type of residential property you are eligible for. However, if you do not have a specific budget constraint, then you might want to decide what type of residential property is suitable for you and your family. This can be determined by other factors such as commuting plans, facilities desired, and amenities which may include nearby schools, shopping malls, eateries and sports complexes.
Financing the purchase usually are from banks. However, HDB flats have the option to obtain HDB loan which interest rates are pegged to CPF ordinary account rate. If you have engaged a real estate agent or a solicitor to act on your behalf, check with them on all fees payable so as to prepare a more accurate estimate of your overall budget. Banks will also charge an administrative fee for processing a mortgage, as well as an additional fee for valuing a property. When applying for a mortgage, the amount you will ultimately be allowed to borrow will depend on your own individual financial circumstances and the bank’s valuation of the property or the actual transaction price. The bank will also take into consideration your ability to make the monthly instalments to repay the loan, as well as your credit history.
The various schemes offered by HDB also has impact on your purchasing power. Some of the schemes are:
• Additional CPF Housing Grant (AHG): This is meant to assist families with a steady income to purchase their first subsidized HDB flat. The AHG can be used for the purchase of new, resale and DBSS flats and it is an additional subsidy over and above the regular market subsidy and CPF Housing Grant that new and resale flat buyers respectively enjoy. This scheme was further enhanced in 2009 to make owning a home easier especially for lower income families. The maximum AHG amount has been increased from $30,000 to $40,000 and the income ceiling has been raised from $4,000 to $5,000. Continuous working period preceding the flat application is reduced from two years to one year.
• Special CPF Housing Grant (SHG): This scheme provides first-timer families who are earning up to $2,250 a month to buy a smaller flat from HDB that is well within their means.
• CPF Housing Grant: The CPF Housing Grant is a housing subsidy (in the form of CPF monies) provided by the Government. The grant assists eligible first-timer family to buy a flat from the developer/HDB.
• CPF Housing Grant for Singles/Singles living with parents: This is to assist singles who are 35 years and older in purchasing a flat.
• The CPF Housing Top-Up Grant: This scheme is a housing subsidy for those who have taken a CPF Housing Grant for Singles previously in their purchase of a resale flat who marry a first-timer citizen spouse or another Singles Grant recipient or in the event where the non-citizen spouse or child have become a Singaporean Citizen or Singapore Permanent Resident.
As home purchase is a long-term financial commitment, therefore it is important for you to consider and plan your budget effectively before purchasing a flat.
These are some steps to take:
• Available cash savings
• CPF Monies
• Housing Loan (if required)
• CPF Housing Grant (if required)
If you are planning to use your Central Provident Fund (CPF) savings to finance part of your purchasing of a private residential property, you must familiarise yourself with the limits on the use of CPF savings for residential properties. Visit the CPF website here.
BUYING BUILDING-UNDER-CONSTRUCTION (BUC)
If you own a public housing, make sure that you have fulfilled your Minimum Occupation Period (MOP). You cannot purchase a private residential property until you have done so. For BUC private properties, sales occurs in show flat environment most of the time. You should be aware that show flats may differ slightly from the actual units due to interior design and the difficulty to predict the kind of view your selected unit has. You should also check the specifications of the unit you are purchasing in the Sale and Purchase Agreement.
The sale and purchase of a private residential property is only deemed complete when the housing developer has transferred to you the legal title of the unit. This will occur at the ‘Expected Date of Legal Completion’ as stated in the Options To Purchase (OTP).
One important thing to note is that HDB does not allow for the buyer, the spouse or anyone listed in the application form to have ownership or a vested interest in other property, be it in Singapore or overseas. Applicants must also not own or have disposed private property within 30 months before the date of application. However, HDB may grant an exemption but this is strictly on a case-to-case basis.
Singaporean buyers may purchase the below mentioned housing units only twice:
• a flat from the HDB;
• a resale flat with the CPF Housing Grant*;
• a DBSS flat from developer;
• an EC unit from developer.
*Only applicable for first-timer applicants
If you have already bought two housing units, you will not be eligible to apply or be listed as an essential occupier in an application. For more information regarding HDB eligibility, visit the HDB website here.
OPTION TO PURCHASE (OTP)
If you wish to purchase a property, you must obtain an Option to Purchase from the seller. An Option to Purchase is essentially a right to a property and acts as a reservation. As the intending purchaser of the property, you will be required to make a payment known as the booking fee, or the option fee, as a deposit of good faith.
The option fee payable for a HDB unit is of an amount not exceeding SGD$1,000 and the Option deposit does not exceed SGD$4,000. For BUC private property, it is known to be booking fee which is 5% of the sale price. For resale private properties, Options Fee is usually 1% of sale price and Exercise Option fee is 4%. Once an Option to Purchase has been granted, you or your representative should receive all necessary documents, including a duplicate of the Sale and Purchase Agreement, within 14 days from the date of the Option to Purchase. This 14 days includes Saturday, Sundays and any public holidays that may fall within the allocated period. If the buyer decides not to go through with the sale, he can simply allow the Option to expire. Only the Option Fee will be lost. Buyers should note there is a difference of 1 day option period between private resale and HDB resale.
During the validity period of your Option the Purchase, the seller is not allowed to offer the property for sale to other interested parties. You should be aware that the OTP obtained from a developer is only valid for three weeks from the date of delivery of S&P to you or your representative, and if you do not exercise your OTP within its validity period, it will expire and the developer is entitled to keep 25% of the booking fee. You will be refunded the remaining 75 per cent of the booking fee and the seller may then offer the property to other prospective buyers.
OTPs for BUCs are non-transferrable. Therefore, all persons intending to buy a property together should be named as intending purchasers in the Option to Purchase. Only those named as intending purchasers in the agreement may exercise the Option to Purchase. After an Option to Purchase has been granted, any name changes in the agreement must be approved by the Controller of Housing.
If you wish to exercise your Option to Purchase, you must sign all copies of the Sale & Purchase Agreement and return them to the housing developer within the validity period, and make a down payment which is 20% of the purchase price, inclusive of the booking fee. Balance downpayment are to be made within eight weeks from the date of OTP.
SALE & PURCHAES AGREEMENT (S&P / SPA)
A Sale and Purchase Agreement is a contract for the sale and purchase of a property between a buyer and a developer. S&P are receivable within 21 days from the OTP date. All licensed housing developers are required to use the standard form of the Sale and Purchase Agreement. Any changes to be made to the Sale and Purchase Agreement must be approved by the Controller of Housing and when this has been done, the housing developer is required to list all amendments made in a separate schedule in the contract. You should ensure that you make all necessary payments due to the housing developer on time in accordance with the payment schedule included in the Sale and Purchase Agreement, or you may be held liable for additional interest payments.
If you do not settle any payments due within 14 days, the housing developer may deem that you have repudiated the S&P and take the necessary steps to annul the contract. Once the contract has been annulled, developers will forfeit 20% of the purchase price and any excess will be returned to you. In the event of a dispute between you and the seller, you may wish to engage the services of a professional mediator to resolve the situation, or seek legal advice if the need arises. You cannot request for the Controller of Housing to intervene as this is outside of the Controller’s jurisdiction.
PROGRESSIVE PAYMENT SCHEME
For BUC private properties, there is only 1 scheme available today; Progressive Payment Scheme. The scheme is breaks up payment in the following manner.
|Signing S&P (8 weeks from OTP date)||15%|
|Completion of foundation||10%|
|Completion of framework (up to your unit level)||10%|
|Completion of brick walls (for your unit)||5%|
|Completion of roof / ceiling (for your unit)||5%|
|Completion of electrical wiring, plastering, plumbing, door & window frame||5%|
|Completion of carpark, roads and drains||5%|
|Obtained Temporary Occupation Permit (TOP)||25%|
|Completion (approximately 6 to 12 months from TOP)||15%|
NOTICE OF VACANT POSSESSION / DELIVERY OF VACANT POSSESSION
When the unit is ready to be handed over by the developer will issue you a Notice of Vacant Possession. The housing developer must also provide you with a copy of the Temporary Occupation Permit or Certificate of Statutory Completion as well as a copy of a certificate by an architect or a professional engineer, who can verify that all works have been completed in accordance with the approved plans and specifications. For resale housings, whether public or private, units has to be handed over in vacant possession. There will usually be a joint-inspection day arranged between both buyers and sellers near the completion date.
There is a defects liability period of 12 months from the date you receive your Notice of Vacant Possession from the housing developer. During this period, the housing developer has an obligation to rectify any defects in the housing project which become apparent. You should inspect your unit thoroughly as soon you take possession of it. If you discover a defect, inform the housing developer in writing and request that it be rectified. The housing developer is obliged to rectify any defect within one month of receiving notice. If the housing developer is unable to rectify the defect within one month of receiving notice, you may notify the housing developer in writing that you intend to engage a third party to carry out the necessary repairs and provide the estimated costs of the repair works.
You should not include any defects in this notification that were not mentioned in the previous notice to the housing developer. If any new defects are found, you should inform the housing developer in writing first before allowing a one-month period for rectification works. Following the second notification, you should allow the housing developer an additional period of 14 days to perform the necessary repairs. If the housing developer still fails to do this, you may proceed with the repair works and make a claim for the costs from the housing developer.
SALE BY PRIVATE TREATY
Resale private properties are sold by private treaty. The option fee and exercise option fee are as mentioned earlier, 1% and 4% of the sale price. The validity period of OTP is usually 14 days with the OTP day inclusive. Unlike HDB resale, the OTP date are excluded in calculation. Experienced agents may sometimes arrange for higher option fee in exchange for longer option period in order to accommodate time consuming situations like preparing of funds or applying for approval from LDU.
Once option is exercised, your solicitor to proceed to complete the purchase of the property, usually between 8 to 10 weeks, during which, you will be required to make the remaining payment of 90 per cent of the purchase price. Your solicitor will need to coordinate with the necessary financial institutions to finance the purchase, prepare the contracts and lodge a caveat on the property, among other things. Buyers’ Stamp Duty and Additional Buyers’ Stamp Duty will also be required to be paid to IRAS within 2 weeks from exercising option.