Planning to buy a home or refinance your home loan? Or perhaps you are planning to start your own property investments?
Whichever the case, we all know that homes don’t come cheap, especially in Singapore. The country’s real estate market is ranked amongst the top 10 most expensive in the world. This makes properties in Singapore good assets and investments. Nonetheless, few people are able to purchase houses in Singapore without the help of a loan.
It is therefore important to be mindful when making a decision about the home you will purchase. You don’t want to make a decision that you will regret as time passes.
How much it costs to own the roof over your head in Singapore
While the price of the home isn’t the only factor to consider when choosing a house to purchase, it is one of the most important. Aside from the property, you will have other factors to consider such as renovation, electricity bills, taxes and more.
Understanding the price of homes will not only help you to choose the right home within your budget, but it will also help you determine a reasonable budget based on your earning power and available financing.
The real estate market in Singapore is quite expensive. If you’re planning to buy a home, you probably already know that the house prices increased in the first half of 2018. This was mostly as a result of economic growth.
Homes in Singapore generally go for an average of between S$400 and S$2000 per square foot. If you want to buy a property that includes land ownership, you will have to part with much more. Therefore, if you’re hoping to purchase a HDB apartment of about 400 square feet with one bedroom and one bathroom, you should be prepared to pay anything from S$200,000. An executive apartment costs an average of $590,000. Find out more about the different property sizes and prices here.
More to the total cost, adding on to the cost of the home
Many prospective homebuyers make the mistake of assuming that the cost of the home is the same as the price of the house. You will actually end up spending much more than the actual price of the house in order to own it. You should therefore factor these into your budget.
Some of the costs you should consider include:
1. Buyer’s Stamp duty
This is a tax that you pay on the Sales and Purchase Agreements (S&P) or Option to Purchase (OTP). Anyone who buys a home in Singapore will have to pay for this. The amount you pay is a percentage of the market price of the property, or the price at which you purchase it (whichever is higher).
Below is the percentage for different property prices.
|On or after 20 February 2018|
|Purchase Price/ Market Value of Property||BSD Rates for Residential Properties||BSD Rates for Non-residential Properties|
2. Additional buyer’s stamp duty
Applies to individuals who already own a home but want to buy another property. This was introduced for residential properties. It is paid in addition to the existing buyer stamp duty. However, not all property buyers pay this stamp duty. For example, if you are a Singaporean citizen and are buying your first property, you won’t be charged this duty. However, you will be charged 7% on the property purchase price if it is your second property.
3. Conveyancing fees
These are legal fees charged by the legal firms for any work done. These often start from S$1,800.
4. Valuation fees
In order for the bank to release funds for you to purchase the property you are interested in, a valuation must be performed. The fee on this will vary depending on the value of the property. It is usually a couple of hundred dollars.
5. Agent’s commission
You will have to factor the agent’s fee into the purchase price if you hired a property agent to help you purchase the property. This commission is usually 1% of the price you purchased the property at.
6. Interest paid for the loan
The interest on the loan adds up. Over the years of repayments, the interest paid can add up to thousands of dollars. It is therefore important to shop around and find the best possible interest rate and loan terms before deciding on one financial institution.
7. Home insurance
Singaporeans or even foreigners usually get insurance for themselves. Well, your home will need an insurance plan as well. Many banks and certain financial companies do require homeowners to protect their investments in the event of fires or break-ins by getting home insurance. This ensures security for the collateral for the loan.
What you need to consider when purchasing a house
Whether you’re buying a house as an investment or to live in, now is a great time to make a purchase. The real estate market in Singapore is experiencing a steady rise. However, this doesn’t mean that you should purchase just any property. Ensure that you make a choice that meets your needs and requirements.
The following are some factors that you should consider when making your choice.
1. The location of the house
Although most of Singapore is highly accessible, it is still important to purchase a property in a great location. This is different for everyone as you will have to determine what is important for you.
Younger people who want to be close to the action prefer to purchase houses in up and coming estates that are centered around suburbs like Punggol. On the other hand, families tend towards more established suburbs with well-established amenities.
When considering location, you should think about the proximity to the CBD, public transportation, schools, hospitals, shopping centers and commercial hubs. Find out the list of popular property locations here.
2. The cost of repairs
Before purchasing the house, do remember to ask yourself whether the house will require repairs. Look out for leaking pipes, uneven or broken tiles, rusty metal bars or stained windows. It is always a good idea to have the home inspected before you make any purchase. This will ensure that any serious structural damage is recognized early. You can use this as a point for negotiation to get a better price, or even opt out of purchasing the home altogether if the damage is significant.
3. The cost of renovating the your dream home
Very few people, if ever, purchase their dream home. There may be special designs, decorations, or architectures that they want. Don’t get the idea wrong, this doesn’t mean that people are never able to live in their dream home. In many cases, people purchase a home that is close to what they envision, with the hope of turning it into what they dream of. They start hammering and hitting the walls to transform the home after purchase. If this is you, you should consider the cost of renovating the home when choosing a house to purchase.
Here’s a quick rundown of renovation costs in Singapore:
Adding a fake partition or ceiling – $200 to $9,000
Demolishing a wall – $2,000 to $5,000
Replacing a wall – $2,000 to $4,500
Finishing floors – $22 to $113 for every square meter
Carpentry work (shelves and cabinets) – $500 to $75,000
Bathroom fittings (tap, toilet bowls, shower area, sink) – $4,000 to $10,000 (depending on material chosen)
Plumbing fixes – $200 to $5,300
Electrical works – $300 to $7,000
Wall painting – $700 to $3,000
Window grills and window replacements – $500 to $10,500
Miscellaneous costs (cleaning up, debris removal) – $500 to $1,000
While you can access a renovation loan, it is important to purchase a home that doesn’t require extensive construction to turn it into what you want.
4. Maintenance charges
Many people are excited to own a home as they will no longer have to pay rent. However, they forget that there are still various maintenance charges that you will have to continue paying even after you purchase the home. These include utility bills and property maintenance e.g. hiring someone to trim the bushes and clean the gutters.
The cost of maintaining the home will depend on various factors, including whether you will outsource services or choose to do the work yourself. They will also depend on how you manage your utilities. If you choose to live in a condominium, you will also have to cater for monthly payments for the condo amenities such as swimming pools and 24/7 security. These usually cost a few hundred dollars per month.
All in all
Ultimately, it is important to consider the factors that are most important to you when making a choice on the property to purchase. It would be useful to explore the different financing routes available to help you become a homeowner. You should also ensure that you consider the different costs involved in the purchase of the home in order to get a clear picture of the actual cost of the house.
If you have any questions about getting a home or about property loans in Singapore (be it a new loan or refinancing your current home loan), feel free to contact our experienced financial team. We will be happy to answer your questions.