Property investment is something many consider in Singapore. With 89.7% of Singaporeans who own at least one property in 2023, the city-state has one of the highest homeownership rates in the world, and many homeowners consider purchasing a second as a property investment.
According to our Singapore Consumer Sentiment Study H1 2024, 52% of homeowners aged 22 to 29 want to buy another property while keeping their current one, and 44% of those aged 30 to 39 indicated interest in real estate investing.
It’s clear the desire to have property investments remains strong, especially among younger Singaporeans. But before diving into the world of real estate investing, the first question you have to ask yourself is this: can you really afford it?
Introduction to Singapore’s Housing Market
Singapore saw property prices climb to all-time highs during the pandemic. While price growth and transaction volumes have cooled, the market remains resilient.
Multiple rounds of property cooling measures have been introduced throughout the pandemic. Most notably, Additional Buyer’s Stamp Duty (ABSD) rates were adjusted in April 2023 so that those who purchased property investments had to now pay higher taxes.
Still, many see real estate investing in Singapore as an area worth exploring. If you’re deciding on whether you should make a property investment, here are several important factors to consider.
1. Second Property Eligibility
The Singapore government imposes restrictions on purchasing a second property if you own an HDB flat.
If you already own an HDB or Design, Build and Sell Scheme (DBSS) flat, you must continue to stay there even if you purchase a second property elsewhere. The exception is if you are given permission by HDB to sublet it.
Of course, since these restrictions only apply to public housing, private property owners looking to purchase a second private property are not subject to these eligibility issues.
If you want to own an HDB flat and condo at the same time, the property you ‘start’ with must be an HDB flat.
2. Loan-to-value (LTV) Limit
The LTV limit determines the amount you can borrow from banks for a particular property. Both HDB and bank loans offer a maximum LTV ratio of up to 75% for the first property.
For bank loans, you can only borrow up to 75% of the property’s value or purchase price (whichever is lower). For HDB loans, you can borrow up to 75% of the flat purchase price for new flats. For resale flats, you can borrow up to 75% of the resale price or value of the flat, whichever is lower.
The LTV decreases with the number of housing loans you take on. Second mortgages have a permitted LTV ratio of 45% of the property’s value. That means second mortgages will not cover as much of the property’s cost, and you will have to fork out more cash.
In short, the more housing loans you have, the less you can borrow each time.
3. Total Debt Servicing Ratio (TDSR)
Aside from a lower LTV limit for second mortgages, you need to consider other ratios like the TDSR. Your Total Debt Servicing Ratio (TDSR) is the percentage of your gross monthly income that can be used to repay all your loans in a given month. Currently, the allowed TDSR is 55%.
This means that if you are a salaried employee whose salary is fixed and you earn $10,000 per month, only up to $5,500 can be used to repay your debts; these include everything from your car loans and student loans to the home loan you took out for your first property, as well as the minimum sum due on your credit card balance.
If your salary is not fixed, then the amount may be lower. In short, unless you somehow increase your gross monthly income, you might not be able to finance a second home loan with the TDSR limits in place.
Because of the TDSR, buyers may be unable to loan as much as they want for their second mortgages. Due to this limitation on second mortgages, it would be wise to use online tools like our affordability calculator to see how much you can afford.
4. Downpayment
The downpayment required for your home depends on the LTV limit and how much you loan from the bank.
If you’ve fully paid up for your first home and only need a new mortgage to finance your second property, it will be considered your first mortgage, and the LTV can be up 75% again. That means your minimum downpayment is 25%, of which 5% must be in cash.
However, if you are still servicing your existing mortgage for your first home and need to take up a second mortgage, as previously mentioned, second mortgages have an LTV limit of 45% only, which means your minimum downpayment is 55%. For second mortgages, the minimum cash downpayment is 25%.
If you have enough savings in your Central Provident Fund (CPF) Ordinary Account, you may be able to use these funds to pay part of the down payment. More often than not, you will be required to fork out large amounts of cash to pay the downpayment.
5. Buyer’s Stamp Duty (BSD)
| First $180,000 | 1% |
| Next $180,000 | 2% |
| Next $640,000 | 3% |
| Next $500,000 | 4% |
| Next $1.5 million | 5% |
| Over $3 million | 6% |
The Buyer’s Stamp Duty (BSD) must be paid when documents are signed for the transfer or sale and purchase of property. The amount for residential properties is calculated as above.
6. Additional Buyer’s Stamp Duty (ABSD)
| ABSD for 2nd property, Singapore Citizen | 20% |
| ABSD for 3rd and subsequent properties, Singapore Citizen | 30% |
| ABSD for PR, first property | 5% |
| ABSD for PR, 2nd property | 30% |
| ABSD for PR, 3rd and subsequent properties | 35% |
| ABSD for foreigners, any properties | 60% |
When you buy a property in Singapore, everyone is subject to BSD. But depending on certain criteria (e.g., your residency status and the number of properties you own), you may also have to pay ABSD. If you’re embarking on real estate investing, you must pay ABSD on your multiple properties.
For Singaporeans, the ABSD for the second property is 20% of the purchase price. For Singapore PRs, the ABSD for their first property is 5% and climbs to 30% for their second property and 35% for their third and subsequent properties.
Foreigners pay the highest ABSD rates, 60%, for every property they purchase unless they are eligible for remission under Free Trade Agreements. US citizens and citizens and PRs of Switzerland, Liechtenstein, Norway, and Iceland are allowed the same stamp duty treatment as Singapore citizens.
Buying property investments will require you to factor in ABSD into the purchase cost. That’s why real estate investing can add up to quite a lot! If you’re unsure of how to calculate how much BSD and ABSD you have to pay, here’s a handy calculator.
Example of Real Estate Investing Costs
If you’ve considered all the above points and are still intending to delve into real estate investing, here’s an example of how the numbers can add up.
Let’s say you are a single Singapore citizen who owns a condominium and is still servicing your loan. You are looking to buy a second property, a $700,000 studio apartment in the OCR, to be exact.
| Condominium Property Value | $700,000 |
| Minimum Downpayment of 55% | $385,000 (of which at least $175,000 must be in cash) |
| Bank Loan of 45% | $315,000 |
| BSD | $15,600 |
| ABSD | $140,000 |
Financing Your Property Investment in Singapore
Purchasing a second residential property in Singapore may provide a stable investment for you and your family. Whether or not you can afford a property investment, though, depends on several factors.
Aside from eligibility, you must have enough gross monthly income, cash on hand, and CPF savings to make the property investment worthwhile.
When you’re ready to discuss financing a second property, speak to one of our Mortgage Experts. They’ll be able to provide you with the latest information on all of your real estate investing and residential property financing needs. Best of all? It’s free!
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