1) WORK OUT YOUR FINANCES
Consider engaging a property agent to help you out right from the start. For the purchase of private property, commission to property agents is usually payable by the seller and not the buyer. Hence, why not engage a property agent to help you out for free? Experienced and well-equipped property agents will be able to guide you on choosing the best property, evaluate all your available options, and even work out a 5 to 10 years investment routemap for you. Buyers who are looking to upgrade from their existing HDB flats to Condominiums may also be pleased to find out that they may be eligible to purchase 2 properties instead, one for own stay, and the other for rental investment. Consider getting a property agent who's not a friend or relative if you are uncomfortable in showing them your finances.
Working out your finances and knowing how much you can afford to pay for your home is one of the most important thing when buying a property. It will help prevent you from committing to a financial transaction you can't afford and having to back out later, which will incur unnecessary expenses and time wasted.
Getting an Approval-In-Principle (AIP) is the first step in working out your finances. It tells you how much a bank is willing to loan you, and the monthly mortgage payable for the loan. Always ensure that you are comfortable with the monthly mortgage payment when setting your budget.
b) CPF Funds
Check the available amount in your CPF account by logging into the CPF website with your singpass. If it's your first property, you will be allowed to uitilise the full amount in your Ordinary Account to pay for the property, up to the Valuation Limit. However, if it's your 2nd or subsequent property, you will have to set aside the Basic Retirement Sum before you can use the excess in your Ordinary Account.
c) Cash on Hand
A minimum 5% of the property price has to be made in cash while the remaining 15% can be paid using your CPF (20% downpayment). You should also factor in additional cost like Buyer Stamp Duty (BSD), Additional Buyer's Stamp Duty (ABSD), as well as Legal Fees ($2,500 to $4,000).
To calculate the Buyer's Stamp Duty payable, you can use the following equation
For properties less than $1,000,000
(Price of Property x 3%) - $5,400 = BSD payable
For properties more than $1,000,000
(Price of Property x 4%) - $15,400 = BSD payable
The Additional Buyer's Stamp Duty was introduced in 2011 as part of the property market cooling measures. It applies only to certain group of home buyers.
1st Property: NIL
2nd Property: 7%
3rd and Subsequent Property: 10%
Singapore Permanent Residents
1st Property: 5%
2nd and Subsequent Property: 10%
1st and Subsequent Property: 15%
If the property is purchased by a mix of buyers, the higher ABSD rate will apply. For example, a Singapore Citizen and Singapore Permanent Resident purchasing their first property will need to pay 5% in ABSD.
Both the Buyer's Stamp Duty (BSD) and the Additional Buyer's Stamp Duty (ABSD) can be paid using your CPF as well. However, if you don't have enough in your CPF account, you will have to pay the balance in cash.
2) FILTERING PROPERTIES
Now that you have worked out your budget, it's time to start looking around for condominiums that's suitable. But how do we choose the perfect property for our own stay and yet at the same time, appreciate in value over time? Here are some of the things to look out for when filtering properties.
a) Current Developments
The current developments around the property is what justifies the price that you are payment for the condominium. Is it near to schools, shopping malls, eateries and public transport? Is it easily accessible to expressways that links to other parts of Singapore? If you are looking to purchase the property for investment purposes and will be renting it out, always check to ensure that the property is easily accessible to business districts or business parks so that you have a pool of ready tenants.
b) Future Developments
This is one of the most important factors when filtering properties. It gives you a glimpse of the potential capital appreciation you can expect to have in the future. Are there any upcoming schools, shopping malls or public transport in the area? What are the changes that will be happening in the area in the next 5 to 10 years?
c) Market Price
Different condominiums in the same vincity comes in different sizes. As such, looking at the price per square feet is one of the best way to compare the prices between them. Although variables such as developer, land size, facilities, etc... do affect the prices, looking at the prices of nearby properties is one of the most reliable way to get an idea of the current value of the property. Overpaying for a property will make it difficult for you to sell off the property and make a decent profit in the future.
d) Heat and Noise
While you are only able to view the showflat and not the exact unit (still under construction) for new condominium launches, knowing the facing of the unit as well as what's surrounding the development helps minimise the risk of both heat and noise pollution, which is often neglected by investors. As a rule of thumb, properties that are right next to expressways tend to be warmer and noisier.
3) VISIT SHOWFLATS
Showflats are typically open 1 to 2 weeks before the official launch date of the development to give prospective buyers the opportunity to find out more about the developments. Before the official launch date, the property is still not up for sale yet and prices are not confirmed yet, though some developers may release an indicative pricing which should not be far off from the actual selling price.
At this point, buyers who are keen to purchase the property may fill up an Expression of Interest (EOI) form and submit it to the developer along with a blank cheque addressed to the developer's project account. The blank cheque is meant to be the 5% booking fee on the property, which will be inserted accordingly when the prices are released on the launch date. By submitting the EOI form along with a blank cheque, you will be registered as a VIP which offer buyers the privilege of cherry picking their choice units at the best possible prices. Generally, developers will release units with the largest discounts to VIPs and after these units are sold out, they will then increase the prices for the next batch of units which will carry on phase by phase until the development is fully sold.
By registering as a VIP, you will be able to participate in the ballot system along with the other people who have registered their interest beforehand to book a unit in the development in the order of when your ballot number is called.
Submitting the EOI form and blank cheque does not obligate you to complete the purchase, at this point, you can change your mind at any point in time and the blank cheque will be returned to you with no peanlty.
4) CHOOSE YOUR UNIT
When your ballot is called, you will be invited to pick a unit and an Option-to-Purchase (for the unit) will be given to you in exchange for the 5% booking fee. An Option-to-Purchase agreement is an Offer-to-Sell by the selller to the buyer. It includes a 14-days exclusivity period during which the seller cannot offer the unit to other buyers. With the Option-to-Purchase, you can now approach the bank to finalise on the home loan. This means getting a Letter of Offer from the bank, a document which states the terms and conditions on which the bank is offering you a loan. You will also need to engage a solicitor to assist you in the purchase of the property and help you with conveyancing. Getting these sorted out as soon as possible will help prevent any delays in your home loan which may result in penalties.
Do note that once the Option-to-Purchase has been issued, opting out of the purchase will allow the developer to forfeit 25% of the booking fee.
5) SALES & PURCHASE AGREEMENT
Within 2 weeks of gettig the Option-to-Purchase, the developer will have the Sales & Purchase (S&P) Agreement delivered to you, which gives you 3 weeks to endorse and exercise your option. To proceed with the Sales & Purchase Agreement, you will be obligated to pay the 15% exercise fee (remainder of the downpayment) upon signing the Sales & Purchase Agreement, or within 9 weeks from the date of the option, whichever is later. You will also be required to pay the Buyer's Stamp Duty as well as the Additional Buyer's Stamp Duty (if applicable) within 2 weeks of signing the Sales & Purchase Agreement.
6) START PAYING
For developments that are still under construction, payments are made every few months, each time the developer hits certain pre-set milestones in construction, which is as follows:
Completion of Foundation Work: 10%
Completion of Reinforced Concrete Framework of Unit: 10%
Completion of Brick Walls of Unit: 5%
Completion of Roofing / Ceiling of Unit: 5%
Completion of Electrical Wiring, Internal Plastering, Plumbing and Installation of Door and Window Frames of Unit: 5%
Completion of Car Park, Roads and Drains Serving the Housing Project: 5%
Notice of Vacant Possession: 25%
On Completion Date: 15%
7) COLLECT YOUR KEYS!
Upon receiving the Notice of Vacant Possession, you can now collect the keys to your new home.
7 STEPS TO PURCHASING YOUR CONDOMINIUM