60755109 the singapore property beginner s guide

7/30/2019 60755109 the Singapore Property Beginner s Guide

1/39

Page|1


2/39

Page|2

Copyright2011byPropwise.sg

Allrightsreserved.Nopartofthispublicationmaybe

reproduced,stored

in

aretrieval

system,

or

transmitted,inanyformorbyanymeans,electronic,

mechanical,photocopying,recordingorotherwise,

withoutthepriorpermissionofthepublisher.


3/39

Page|3

IntroductionTheSingaporePropertyBeginnersGuidewaswritten

tohelptheabsolutebeginnerunderstandthe

Singaporepropertymarket.Buyingahomeisthe

biggestpurchasemostofuswillmakeinourlives,yet

manypeopledonothavethebasicknowledgethey

needtomakeaninformeddecision.

Ivewrittenthisguidetochangethat.Itcomprisesthe

mostrelevantpostsonmyblogforthosejuststarting

out.Hopeyoufinditusefulandgoodluckonyour

propertyjourney!

Towisdomandbeyond,

Mr.Propwise

AboutPropwise.sg

Propwise.sg

is

a

Singapore

property

blog

dedicated

to

helpingyouunderstandtherealestatemarketand

makebetterbuying,selling,rentingandinvesting

decisionsminusallthehypeandmisinformation.

Ifyouhaventdonesoalready,dontforgettohead

overto

www.propwise.sg

and

sign

up

for

our

newslettertogetourfreereportsandupdates.


4/39

Page|4

Contents

Typesof

homes

.................................................

5

DistrictsandPlanningAreas...........................12

Majorplayersinthepropertymarket............18

Knowyourpropertylingo...............................24

The10StepSystemtoBuyingaPropertyin

Singapore........................................................28

HowtoChooseYourMortgage......................34


5/39

Page|5

Typesofhomes

Whatare

the

different

of

housing

options

available

in

Singapore?Wecanbroadlysplittheoptionsinto

Public/Quasipublicandprivatehousing.

Publichousing(HDB)

Housingand

Development

Board

(commonly

known

asHDB,astatutoryboardoftheMinistryofNational

Development)flatsareregulatedandmaintainedby

thegovernment.Theyaremeanttobeanaffordable

housingoptionforSingaporeresidents,and

governmentsubsidies

are

available

for

the

purchase

andfinancingofthese.Theyaretypicallylocatedin

selfsufficientclustersknownashousingestates

whereaconcentrationofHDBblocksaresupported

byamenitiessuchassupermarkets,foodcourts,

coffeeshops,

clinics,

malls,

parks

and

agood

public

transportationnetwork(viatrainsandbuses).

Morethan80%ofSingaporeansliveinHDBflats,with

morethan90%ofthemowningthehometheylivein.

TobuyanHDBflat,youneedtomeetanumberof

eligibilityrequirements,theprimaryonebeingthe

possessionofaSingaporeancitizenshiporPermanent


6/39

Page|6

Residence(visitwww.hdb.gov.sgformore

information).

TypesofHDBflats

Studioapartments

Studioapartmentsizesrangefrom377484square

feet,and

are

meant

for

senior

citizens

who

want

to

liveindependently.Theyarerenovatedwithelder

friendlyfeaturesandaresoldon30yearleases,

makingthemmoreaffordablethanotheroptions.

2-roomflat

2room

flats

are

usually

under

500

square

feet

and

containamasterbedroom,kitchen,livingareaand

storeroom.Theyaremeantforlowerincome


7/39

Page|7

households.Theyaretheprivatehousingequivalent

ofaonebedroomapartment.

3-roomflat

Thefloorareaofnew3roomflatsrangefrom646to

700squarefeetandtheycomewithonemaster

bedroom,onecommonbedroom,akitchen,living

area,

common

bathroom

and

storeroom.

They

are

the

privatehousingequivalentofatwobedroom

apartment.

4-roomflat

4roomflatsaretypicallyunder1,000squarefeetin

size,and

have

amaster

bedroom,

two

common

bedrooms,akitchen,livingareaandstoreroom.They

aretheprivatehousingequivalentofathreebedroom

apartment.

5-

room

flat

5roomflatsarearound1,200squarefeetandhavea

masterbedroom,twocommonbedrooms,kitchen,a

separatelivinganddiningarea,andstoreroom.They

aremeanttoprovidealargerlivingspacefor

extendedfamiliesof45members.Theyarethe

privatehousingequivalentofalargerthreebedroom

apartment.


8/39

Page|8

Executiveflats

Executiveflatsaretypicallyaround1,400squarefeet

insize,

and

have

amaster

bedroom,

two

common

bedrooms,akitchen,separatelivinganddiningarea,

storeroom,andspaceforastudyroom.Some

executiveflatscomewithabalconyaswell.Theyare

theprivatehousingequivalentofa3+1orfour

bedroomapartment.

DBSSflats

Design,BuildandSellScheme(DBSS)flatsarebuiltby

privatedeveloperswhohavetobidfortheland,

design

and

construct

the

flats.

They

usually

come

with

minimalfinishingsandlookmorelikeprivatehousing

butwithoutthefacilities.TheHDBprovideshousing

loanandconveyancingservicestoeligiblebuyers.The

incomeceilingtobuyDBSSflatsisalsohigherat

$10,000insteadoftheregular$8,000.

Quasipublic

ExecutiveCondomniums

ExecutiveCondominiumsareahybridbetweenpublic

andprivate

housing.

They

were

introduced

by

the

HDBtocatertoyounggraduateandprofessional

Singaporeanswhowantedhigherqualityhousingbut


9/39

Page|9

couldnotaffordprivateproperty.Theyarebuiltby

privatedevelopersandhavecondominiumfacilities,

andthe

income

ceiling

to

buy

them

is

$10,000.

But

theyalsohaverestrictionssuchastheMininum

OccupationPeriodof5yearsbeforetheycanbesold,

andfromYear6to10canonlybesoldtobuyerswho

meetHDBseligibilityrequirements.Fromthe11th

yearall

restrictions

are

lifted

and

they

can

be

bought

andsoldfreely,evenbyforeigners.

PrivatehousingPrivatehousingcanbroadlybecategorizedintonon

landedand

landed

property.

Non-landed

Condominiums

Condominiumsarehighriseresidentialdevelopments

thatusually

come

with

facilities

such

as

aswimming

pool,gym,security,BBQareaandsoon.Technicallya

developmentisonlycalledacondominiumifitsitson

asitethatislargerthan4,000squaremeters(43,056

squarefeet).


10/39

Page|10

Apartments

Apartmentsaremediumtohighriseresidential

developmentsthataresituatedonasmallerplotof

landthancondominiumsandtypicallyhavefewer

facilities.

Landed

Terrace

Thesearehousesthatsharecommonwallswith

neighbourson

both

sides,

unless

at

the

end

of

arow.

Semi-detached

Thesehousesshareonewallincommonwitha

neighbour.

Detached/Bungalows

Thesehousesdonotshareawallwithotherhouses

andarelocatedontheirownpieceofland.


11/39

Page|11

GoodClassBungalow

GoodClassBungalowsareanexclusivecategoryof

detachedhomes

with

aminimum

land

plot

size

of

1,400squaremeters(15,070squarefeet)inprime

landedareassuchasNassimRoad,ClunyRoad,

TanglinRoad,DuchessRoadandKingAlbertPark.

Shophouse

AuniquearchitecturalfeaturetoSoutheastAsia,

shophousesareterracedrowsoflowrisebuildings

withnarrowfrontagesbutdeeprears,andtypically

haveshopsonthegroundfloorwithaccommodations

on

the

upper

floors

(hence

the

name).


12/39

Page|12

DistrictsandPlanningAreas

Whilethere

are

no

longer

any

official

district

codes

usedinSingapore,manypeoplewilloftenrefertoa

propertybeinginaspecificdistrictwhenbuyingor

renting.Thesecodeswereoriginallyusedforthe

postaldistricts,butwerereplacedbythe6digitpostal

codesanumber

of

years

ago.

Here

are

the

general

areasthedistrictcodesreferto:

01 RafflesPlace,Cecil,Marina,People'sPark

02Anson,

Tanjong

Pagar

03 Queenstown,TiongBahru,Alexandra


13/39

Page|13

04 TelokBlangah,Harbourfront,Sentosa,Keppel,

MountFaber

05 PasirPanjang,BuonaVista,Dover,WestCoast,

ClementiNewTown

06 HighStreet,BeachRoad,CityHall

07Middle

Road,

Golden

Mile,

Bugis,

Rochor

08 LittleIndia,FarrerPark,SerangoonRoad

09 Orchard,Cairnhill,RiverValley

10 Ardmore,BukitTimah,HollandRoad,Tanglin

11 WattenEstate,Newton,Novena,Thomson

12 Balestier,ToaPayoh,Serangoon

13 Macpherson,Braddell,PotongPasir

14Geylang,

Paya

Lebar,

Eunos,

Kembangan

15 Katong,JooChiat,AmberRoad,MarineParade,

TanjongRhu,Meyer

16 Bedok,UpperEastCoast,Eastwood,KewDrive,

ChaiChee,

Siglap

17 Loyang,Changi


14/39

Page|14

18 Tampines,PasirRis,Simei

19Serangoon

Garden,

Hougang,

Punggol,

Sengkang

20 Bishan,AngMoKio,Braddell

21 UpperBukitTimah,UluPandan

22Jurong,BoonLay,Tuas,Lakeside

23 Hillview,DairyFarm,BukitPanjang,ChoaChu

Kang,BukitBatok

24 LimChuKang

25Kranji,

Woodgrove,

Woodlands

26 UpperThomson,Springleaf

27 Yishun,Sembawang,Admiralty

28Seletar,YioChuKang

Whilethereareatotalof28districts,youllmostly

hearreferencestodistricts9(Orchard,RiverValley),

10(BukitTimah)and11(Newton,Novena)asthe

traditionalhighendhousingareas,andtodistricts1

(MarinaBay),

2(Tanjong

Pagar)

and

4(Harbourfront,

Sentosa)asthenewupandcomingluxuryareas.For

amorerelaxedandlowerdensitylifestyledistricts14


15/39

Page|15

(Eunos,Kembangan),15(Katong,MarineParade,

TanjongRhu)and16(UpperEastCoast,Siglap),

broadlyknown

as

East

Coast,

are

also

popular.

DistrictcreepDonotethatthereissomeambiguityaroundthe

bordersofthesedistrictssooneareacouldcovertwo

ormore

districts.

In

fact

in

recent

years

as

the

propertymarkethasheatedupIvenoticeda

phenomenonIcalldistrictcreep,whereproperties

inalessprestigiousareaaremarketedasbeingina

moreprestigiousonenearby.

SoforexamplepropertiesinNewtonareadvertisedas

beinginOrchard,propertiesinNovenaasNewton,

andthoseinBalestierasbeinginNovena.Thisis

probablyaresultofdeveloperswantingtopushup

thepricestheycanchargebyincreasingthestatureof

theirdevelopment,andofstatusconscious

Singaporeanswantingtoshowcasetheirhomeas

beinginamoreprestigiousdistrictbutnotbeingable

toaffordone!


16/39

Page|16

UrbanPlanningAreasTheMaster

Plan

and

Concept

Plan

Distinctfromtheconceptofdistrictsthatare

commonlyusedinthepropertymarket,theUrban

RedevelopmentAuthority(URA)hasdivided

Singaporeinto55urbanplanningareas,whichare

organized

into

five

regions

Central,

East,

North,

NorthEastandWest.TheURAputstogethertwo

urbanplans,theConceptPlanandMasterPlan,which

cansignificantlyaffectthevalueoftherealestate

whenanychangestotheplantakeplace.

TheConcept

Plan

is

the

long

term

strategic

land

use

planwhichguidesSingapore'sdevelopmentovera

fortytofiftyyearperiod.Reviewedeverytenyears,it

providesforsufficientlandtomeetlongterm

population,economicandqualityoflifegoals.Thelast

ConceptPlan

Review

was

in

2001,

and

the

next

one

willbecompletedin2011.

TheMasterPlanisthemediumtermstatutoryland

useplanwhichguidesSingapore'sdevelopmentin

over

a

ten

to

fifteen

year

period.

Reviewed

every

five

years,itrendersthebroadstrategiesoftheConcept

Planintodetailedplansthatshowthepermissible

landuseanddensityfordevelopmentsinSingapore.


17/39

Page|17

ThelastMasterPlanwasin2008,andthenextone

willbecompletedin2013.


18/39

Page|18

Majorplayersintheproperty

market

ThepropertymarketinSingaporeisdrivenbyfour

majorgroupsofplayersthegovernmentagencies,

developers,propertyagenciesandbanks.

1)Governmentministriesand

agenciesThegovernmentministriesandagenciesinSingapore

shapepolicychangesthatcansignificantlyaffect

sentimentin

the

property

market

and

hence

real

estateprices.

Theministriescoordinatepoliciestocontrolor

supportpropertypricesdependingontheirviewof

thelevelofspeculationandassetpricestability.For

example,abroadroundofpropertymeasuresthat

affectedthenewandresaleHDBmarket,taxesand

banklendingwasjointlyannouncedbytheMinistryof

Finance(MOF),MinistryofNationalDevelopment

(MND)andMonetaryAuthorityofSingapore(theMAS

isSingaporescentralbankandfinancialregulator)on

August302010.


19/39

Page|19

Whiletheministriescomeupwiththebigpicture

policies,thestatutoryboardsundertheministriesare

generallyresponsible

for

issuing

the

detailed

guidelinesandimplementingpolicies.

Thekeystatutoryboardsinclude:

BuildingandConstructionAuthority(BCA)

TheBCA

is

astatutory

board

under

the

MND

whose

roleistoprovideguidelinesforbuildings,structures

andinfrastructuresoastoshapeasafe,highquality,

sustainableandfriendlybuiltenvironment.

Housing

Development

Board

(HDB)

TheHDBisastatutoryboardundertheMNDandthe

publichousingauthority.Itsmissionistoprovide

affordablequalityhomesforSingaporeansby

planninganddevelopingvibrantpublichousingtowns

with

great

amenities

and

cohesive

communities.

It

alsopublishesstatisticsonthepublichousingmarket

includingaquarterlyResalePriceIndex.

SingaporeLandAuthority(SLA)

TheSLAisastatutoryboardundertheMinistryofLaw

focusedon

land

resource

optimization.

In

its

developmentalrole,itoverseesgovernmentland

sales,leases,managementofstatelandandbuildings,


20/39

Page|20

acquisitionsandallocation,developingandmarketing

landrelatedinformationandmaintainingthenational

landinformation

database.

In

its

regulatory

role,

it

actsasthenationallandregistrationauthorityand

managesandmaintainsthenationallandsurvey

system.

UrbanRedevelopment

Authority

(URA)

TheURAisastatutoryboardundertheMND,andthe

nationallanduseplanningauthority.Itprepares

mediumandlongtermstrategicandlocalplansfor

landuseinSingapore,andhelpstoimplementthem.

At

the

macro

level,

the

URA

controls

residential

developmentinSingaporeviauseoftheplotratioand

buildingheight.Atthemicrolevel,itdevelops

guidelinesonhousingtypeandform.Italsopublishes

updatesontheprivatepropertymarketincluding

price

indices

and

individual

transactions.

2)DevelopersThebasicroleoftherealestatedeveloperisto

convertrawlandintoacompletedpropertyandlease

orsellit.Todosotheyhavetoorchestratearangeof

activities:buyland,financethedeal,workwith

architectstodesigntheproject,obtainapprovalsfrom

thegovernment,engageaconstructioncompanyto


21/39

Page|21

build,workwithagenciestomarketandsellthe

propertyetc.

Youlloftenhearnewsofdevelopersbiddingforland

thatthegovernmenthasputupfortender.

Developersneedtoconstantlybuylandtomaintain

theirlandbank,thepipelineofprojectsthattheyhave

underdevelopment.

The

price

they

pay

for

land

is

also

agoodindicatoroftheirviewonthemarketfurther

downtheline,andwillgiveyouaroughideaofthe

pricetheyhavetolaunchtheprojectforsaleinorder

tomakemoney.

Prominentproperty

developers

in

Singapore

include

Capitaland,Centrepoint,FarEastOrganization,City

DevelopmentLimited,GuocoLand,KeppelLand,

WheelockProperties,AllgreenProperties,HoBeeand

SCGlobal.

3)PropertyagenciesandagentsPropertyagenciesandagentsarebusinessesor

peoplethatarrangetheselling,rentingor

managementofproperty.Theyactasthe

intermediary(middleman)

between

the

buyer

and

sellertheytryandmatchsellerswhowishtosell


22/39

Page|22

withbuyerswhowishtobuy,andtakeacommission

foranysuccessfulmatches.

TypicallyinSingaporepropertyagentswillchargea

commissionof12%tothesellerofaprivateproperty,

and1%tothebuyerand12%tothesellerforHDB

flattransactions.

Asof

mid

2010,

there

are

an

estimated

25,000

propertyagentsand1,700agenciesinSingapore.

Somepropertyagentsarefulltimeprofessionals

whileothersarejustmoonlightingasparttimers.The

largeagenciesincludePropnex,ERA,HSR,DTZ,Knight

Frankand

Dennis

Wee.

Many

of

the

agencies

are

one

ortwomanoperations.

Foralongtimethereputationoftheindustrywas

tarnishedbytheactionsofasmallgroupof

unprofessional

real

estate

agents,

with

many

calling

forgreatergovernmentregulation.Thuson

September15th

2010,thegovernmentintroducedthe

EstateAgentActandsetupanewstatutoryboard

calledtheCouncilforEstateAgencies(CEA)thatwill

regulate

agents

and

the

agencies.

There

are

also

new

entrycriteriaandamandatoryexamthatallagents

mustpassbytheendof2011.Theserequirementsare


23/39

Page|23

expectedtoreducethenumberofagentsand

agenciesby30%.

4)BanksBankprovidethepetrolthatdrivesthewholereal

estatemachinemoney.Theyfundtheproperty

projectsofrealestatedevelopers,andextend

mortgagesto

qualified

buyers

so

they

can

purchase

a

property.Theiraimistomakeaspread(the

differencebetweentheinterestratestheychargeto

lendmoney,andtheratestheypayforyourdeposits),

andminimizetheriskofanylosses(e.g.frompeople

defaultingon

their

loans).

ThetoplocalbanksinSingaporeincludeDBS,UOB

andOCBC.TheactiveforeignbanksincludeHSBC,

CitibankandMaybank,amongstmanyothers.

Togetherthese

four

players

drive

the

functioning

of

thepropertymarket.Thegovernmentsetsguidelines

andprovideslandfordevelopment.Developersbuy

landandtransformitintoproperty.Agenciesand

theiragentshelptomarketandsellthisproperty,and

banksprovide

the

funding

that

makes

it

all

happen.

Phew,thisisalongarticle,butIhopeitprovidesyou

withahighlevelperspectiveofhowthemarketworks!


24/39

Page|24

Knowyourpropertylingo

Theproperty

market

has

its

own

jargon

and

acronyms

thatcanbeconfusingtothebeginner.Nofear,the

termsbelowwillcoverthemostcommonlyused

jargonyouwillhearwhenpeopletalkaboutthe

market,andwillencounterifyouarebuyinga

property.

CSCTheCertificateofStatutoryCompletion(CSC)isissued

bytheCommissionerofBuildingControloncethe

buildingworks

have

been

completed

and

all

requirementshavebeencompliedwith.Itdenotes

legalcompletionandisusuallygivenafterthe

TemporaryOccupationPermitisissued.

Downpayment

Thisistheinitialupfrontportionofthetotalamount

duewhenyoupurchaseahouse.Thedownpayment

canusuallybepaidpartlyincashandpartlyusingyour

CPF.

Enbloc

Enblocisthecollectivesaleofanumberofownersof

separateunitsinaprivateresidentialorcommercial


25/39

Page|25

building.Unitssoldinanenblocsaleusuallyfetcha

higherpriceversuswhatthemarketpricewouldbe,

asthe

developer

needs

to

offer

apremium

to

convincealltheownerstosell.

FreeholdFreeholdisaformofpropertytenurewhereyouown

theproperty

for

an

indefinite

period

of

time.

LeaseholdLeaseholdisaformofpropertytenurewhereone

partybuystherighttooccupylandorabuildingfora

given

length

of

time.

Common

lengths

of

the

lease

for

residentialpropertyare99yearsand999years.

LTVLoanToValue(LTV)isthemortgagequantumdivided

bythetotalappraisedvalueofrealproperty.LTVis

oneoftheriskfactorsthatlendersassesswhen

qualifyingborrowersforamortgage.

OTPTheOptionToPurchase(OTP)isarightgivenbythe

vendorof

aproperty

to

apurchaser

to

buy

the

propertyataspecifiedpricewithinaspecifiedperiod

oftime(thevalidityperiodoftheoption).The


26/39

Page|26

purchasermustpayabookingfeetoobtainthisright,

andhastoexercisetheOTPwithinitsvalidityperiodif

hedecides

to

buy

the

property.

MOPTheMinimumOccupationPeriod(MOP)isthelength

oftimeabuyerofanHDBflathastostayinitbefore

hecan

sell

it.

PlotratioTheplotratioisthetotalcoveredareaonallfloorsof

allbuildingsonacertainplotdividedbytheareaof

the

plot.

The

plot

ratio

tells

the

density

of

the

developmentonthatpieceofland.

PsfPerSquareFootisaunitofmeasurementofarea,and

$/psfisthetotalpriceofthepropertydividedbythe

landarea(insquarefeet).

SIBORTheSingaporeInterbankOfferedRate(SIBOR)isa

dailyreferenceratebasedontheinterestratesat

whichbanks

offer

to

lend

unsecured

funds

to

other

banksintheSingaporewholesalemoneymarket(or


27/39

Page|27

interbankmarket).Itissimilartotheinternationally

usedLIBOR(LondonInterbankOfferedRate).

StratatitleStratatitleisaformofownershiptypicallyusedfor

apartmentblocksorcondominiums.Typicallya

projectisdividedintolots(unitsorapartments),and

eachlot

will

have

ashare

of

the

entire

project.

This

is

distinctfromlandedpropertywheretypicallythe

ownerwillhavetitletotheland.

TOP

A

building

can

only

be

occupied

by

the

owner

or

tenantswhenitreceivestheTemporaryOccupation

Permit(TOP),whichisgrantedbytheCommissioner

ofBuildingControloncecertainrequirementsaremet.


28/39

Page|28

The10StepSystemtoBuying

aProperty

in

Singapore

Buyingahomeisthebiggestpurchasemostofuswill

makeinourlives.Yetmanypeoplerushtobuya

propertywithlesspreparationthantheywould

planningaholiday.

This

can

have

financially

disastrous

consequences,especiallyinlightofthemeasures

announcedbythegovernmentonAugust30th2010,

whichhavecreatedalotofuncertaintyinthe

marketsdirection.

FollowthestepsIvelaidoutbelowwhenbuyinga

propertyandyouwillbemuchlesslikelytomakean

expensivemistake.

Step1Decidewhetheryouwantto

rentorbuyBuyingahomeisoftenanemotionaldecision.Thats

finejustmakesureitsarationalonetoo.Honestly

askyourselfifyouneedtobuyahome,andwhether

rentingmightbeaviableoption.


29/39

Page|29

Step2Calculatehowmuchyoucan

afford

Firstlookathowmuchmoneyyoucurrentlyhave,

includingcashandCPF.Notethatbasedonthe

governmentspropertymeasures,ifyoualreadyhave

atleastoneloanoutstanding,yourminimumcash

outlay

will

increase

from

5%

to

10%.

Next

figure

out

howmuchyoucanborrow,takingallyouroutstanding

debtsintoaccount.Youcanworkwithabanker,or

usetheaffordabilitycalculatoravailableonLoanguru.

Mostbankswillonlylenduptoa3550%DebtService

Ratio

(your

total

debt

payments

divided

by

your

monthlyincome).

Step3Figureoutwhatsortofhome

youwant

What

are

your

current

and

future

needs

for

housing?

Forexample,anewlymarriedcouplethatbuysa

studiooronebedroommightfindwithinayearortwo

thattheyneedatwoorthreebedroomapartment

onceababyisontheway.WouldyoupreferHDBor

privateproperty,ifyoucanaffordit?Whichdistricts

orareasdoyouprefertolivein?Whatarethe

amenitiesandpublictransportationoptionsyouwant?


30/39

Page|30

Step4BuildalistofoptionsYoucanchoosetoeitheruseabuyersagentand/or

goDIY.Lookatbothoffline(e.g.classifiedadsinthe

newspapers)andonline(propertywebsites)sources

togetthelargestpooltochoosefrom.Basedonwhat

youvefiguredoutfromSteps2and3above,comeup

withalistofpotentialprojectstoconsider.

Step5Domarketresearchand

narrowdownyourchoicesChecktherecenttransactedpricesoftheseprojects

fromtheURAwebsite.Comparepricestherewith

surroundingprojects.Comparethetransactedprices

withtheaskingprices.Ifyouarebuyingfor

investment,lookatthemarketrentsandrentalyields.

Eliminatetheprojectsthatdonotlookattractive.

Step6

Go

for

property

viewings

Basedonthissmallerlistofprojectsarrangeviewings

ofatleastafewdifferentunitsineachproject.Its

helpfultotakephotosandnotestohelpyou

rememberwhatyousaw.Visiteachprojectat

differenttimes

of

the

day

and

night

to

see

if

it

is

noisy

orotherwiseunpleasant.Narrowdownyourlistto


31/39

Page|31

yourtopfewunitsanddoasecondviewingif

necessary.

Step7Getindicativevaluationsand

yourmortgagepre-approvedDontmissthiscriticalstep!Beforeyoumakeanoffer

ensurethatyouhavegottenanindicativevaluation

fromabank

and

an

in

principle

approval

for

a

mortgage.Youcanapproachthedifferentbanks

yourselforuseamortgagebrokertosavetime.Based

onthenewmeasures,ifyoualreadyhavean

outstandingloanyourLoanToValuation(LTV)limit

hasbeen

lowered

to

70%

from

80%,

so

youll

need

to

coughupmorecash.

Also,bankswillonlylendtoyoubasedontheLOWER

ofthevaluationlimitorpurchaseprice,soifyouare

buying

above

the

banks

valuation

you

will

need

to

paythedifferenceincash.Ifyouaresellingyour

existinghometopurchaseanewoneandhopeto

borrowat80%LTV,younowneedtopresentproofto

qualify(intheformofasignedpurchaseagreement

for

your

current

home

and

certification

showing

that

stampdutyforyourexistingpropertyhasalready

beenpaidforbythebuyer).


32/39

Page|32

Step8Makeanofferandnegotiate

the

purchase

Onceyougettheindicativevaluationsandatleast

onepreapprovedmortgagefromthebanks,youcan

thenmakeanofferknowingyoucanborrowwhatyou

need.Therehavebeenanumberofunfortunatecases

of

buyers

who

have

lost

their

deposits

because

they

realizedlaterthatbankswouldnotfinancetheir

purchase.Whennegotiatingthepurchaseprice,it

helpstohaveanumberofoptionsonhandsoyouare

notforcedtooverpayduetoalackofoptions.

Step9

Sign

and

exercise

the

Option

ToPurchaseIftheselleracceptsyourbid,typicallyyouhavetoput

downa1%deposittogettheOptionToPurchase

(OTP),

and

have

14

days

to

exercise

it,

by

which

time

youwillhavetopayanother4%ofthepurchaseprice.

Makesureyouhavethefundsonhandtodoso.Once

yougettheOTPliaisewithyourconveyancinglawyer

andmortgagebankertosettletheprocedures.


33/39

Page|33

Step10Completethesaleand

collect

the

keys

Beforethecompletiondate,doaninspectionofthe

hometoconfirmthatallagreedonfixturesanditems

arestillaround.Onthedateitself,collectthekeysand

checkthatyouhaveacompleteset.Congratulations!

You

are

the

owner

of

a

new

home.

Time

to

think

aboutrenovationandfurnishing

Iveputtogetheradetailedchecklistwithsubsteps

foreachofthestepsabove.Youcandownloaditat

www.propwise.sgbyenteringyouremailaddressin

theform

on

the

right.

Gothroughthesestepswhenbuyingahomeitwill

saveyoutearsandmoney!


34/39

Page|34

HowtoChooseYourMortgage

Choosingamortgage

can

be

confusing.

There

are

so

manyoptionstothinkabout:fixedorfloatinginterest

rates,loanterm,lockinperiods,subsidies,penalties

andotherspecialfeatures.Thereisntonebest

mortgageoutthereitalldependsonyourneedsand

preferences.

Ifyoudliketocompareloansonlineandevengetfree

cashrewardsifyoutakeupaloan,checkout

http://www.propwise.sg/moneyiq/.

Hereare

the

main

options

you

need

to

consider

when

makingyourdecision:

1)LoanamountThelocalbanksusuallygivealoanofupto80%ofthe

propertyvalue

for

first

time

homebuyers,

but

the

actualamountwilldependontheirassessmentof

yourabilitytorepaytheloan.Theytypicallylookata

debtservicingratioof3550%asaceiling.Tocalculate

thisratio,theysumupyourlongtermliabilities

(includingthe

potential

mortgage

payment)

and

dividethatbyyourmonthlyincome.


35/39

Page|35

Alsonotethatthebankwillonlylendyouupto80%

oftheLOWERofyourpurchasepriceortheirown

internalvaluation.

So

ifyour

purchase

price

is

above

theirvaluation,youwillhavetotopupthedifference

incash.Asabestpractice,youshouldalwaysgetan

indicativevaluationandinprincipleapprovalfroma

bankbeforeyoucommittoapurchase.

2)LoantermTheloantermisthedurationoftimethatyoutaketo

completelyrepaytheloan.Loantermsusuallyrange

from10to35years.Thelongeryourloanterm,the

smallerthe

monthly

repayment

you

need

to

make,

butthehigherthetotalamountofinterestyouwill

eventuallypay.

Alsonotethatyouragemaybealimitingfactor

bankswilltypicallycapthemaximumtermuptothe

ageof65.Soifyoure50yearsold,youmayonlybe

givenaloantermofupto15years.Youngbuyers

lookingtomaximizetheamounttheycanborrowwill

usuallyselecta35yearloanterm.

3)Fixed

or

floating

rate

Fixedratesoffertheborrowersecurityandstabilityas

theratedoesnotchangeoveracertainperiod.As


36/39

Page|36

interestratesarecurrentlyverylow,iftheyriseyou

willbeprotectedfromupwardadjustmentsofyour

monthlymortgage

payment.

But

this

comes

at

aprice

fixedratepackagesusuallychargehigherinterest

thanfloatingratepackages.

Borrowerswhobelievethatinterestrateswillfallor

remainlow

for

along

period

of

time

can

go

for

floatingratepackagesastheycangetlowerinterest

ratesupfrontandtheirmonthlypaymentswillfallif

interestratesfall.

Forfloatingorvariableratepackages,theyare

typicallylinked

to

either

of

the

two

major

benchmark

rates:SiborandtheSwapOfferRate(SOR).These

ratesaremainlyaffectedbyUSinterestratesand

Singaporebankingsystemliquidity.Butdonotassume

thattheywillalwaysstayatthelowstheycurrently

areat

(e.g.

the

SIBOR

is

around

0.5%

now)

in

2007

theywereashighas3.6%!Asaruleofthumb,you

shouldlookatyourmonthlypaymentsusingratesof4%

tomakesureyoucanstillserviceyourmortgagein

caseratesspikeup.


37/39

Page|37

4)OtherspecialfeaturesSomeloanshaveaninterestoffsetfeature,where

depositsatthebankcanbeusedtooffsettheloan

amountsoyouonlypaytheinterestonthedifference.

Forborrowerswithlargeamountsofcashthatthey

wanttokeepavailableforotherusesatamoments

notice(e.g.investinginthestockmarket)thiscouldbe

agoodoption.

Somebanksalsoofferinterestonlypackages,usually

onacasebycasebasis.Fortheseloans,youonlypay

theinterestamountforaspecifiedperiodoftime,and

afterthat

the

loan

will

revert

to

anormal

interest

plus

principleloan.Thisoptionmaybesuitablefor

investorswhowanttominimizethecashoutflow

duringtheinterestonlyperiod.

5)

Subsidies,

lock-

in

period

and

penaltiesMostloanscomewithsomesubsidiesincludingthe

legal,valuationandfireinsurancefees.When

comparingmortgages,borrowersshouldcheckwhat

thevarious

fee

subsidy

amounts

are.

For

example,

thereisusuallyacapof$2,0002,500onthelegalfee,


38/39

Page|38

andifyourlegalfeesexceedthoseyouwillhaveto

topupthedifference.

Thelockinperiodyoushouldchoosedependsonyour

expectationofwhenyouwillsellthepropertyand

alsoonyourviewofwhereinterestratesaregoing.

Typicallytheshorterthelockinperiod,thehigherthe

interestrate.

But

ifyou

repay

the

mortgage

within

the

lockinperiod,youtypicallyhavetopayapenaltyof

anywherefrom0.75%to1.5%,whichissubstantial.

Somebankscanwaivethepenaltyifyouareselling

yourhouse(asopposedtojustrepayingthe

mortgage),

so

make

sure

you

check

if

they

will

include

thisclause.

Heresatiptosaveyoumoneysometimesthebank

cangiveyouanadditionaldiscountofftheir

advertisedinterestrates,especiallyifyouvebeena

longstandingcustomer.

Just

ask!

Ive

known

people

whohavegottena0.05%discountthataddsupto

someseriousmoney.

Ifyoufeeloverwhelmedbyallthedifferentoptions

above,

you

can

also

consider

engaging

the

services

of

amortgagebroker,whowillhelptofiltertheright

packagesforyoubasedonyourrequirements.You


39/39

shouldnothavetopaythemanyfeeastheywillgeta

commissionfromthebankiftheycansuccessfully

arrangealoan

for

you.

Happy

mortgage

shopping!

Tocompareloansforfreeandgetcashrewardsifyou

takeupaloan,checkout

http://www.propwise.sg/moneyiq/.

60755109 the singapore property beginner s guide

Documents