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Buying Second Property In Singapore? Loan, Downpayment, Taxes

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Venturing into the Singaporean real estate market for your second time in 2024? The decision to purchase a second property is not one to be taken lightly. The landscape is rife with new loan stipulations, down payment requirements, and evolving property tax considerations—each a crucial piece of the investment puzzle.

Whether you’ve already navigated these waters once or are new to the intricacies of property investment, it’s time to brush up on your knowledge. Policies and regulations have undergone significant revisions, potentially altering the course of your property buying journey.

This article isn’t just a refresher; it’s an essential guide packed with the latest insights you need to stride confidently towards acquiring your second property. In 2024, property prices are expected to remain high and stable, though demand may be subdued.

Is it worth it to buy a second property in Singapore?

According to property analysts, Singapore’s property prices are expected to remain high yet stable in the first six months of 2024. The private residential sector is expected to see a modest yet steady growth of 3-5% in 2024.

Landed home prices are expected to remain relatively stable, with a potential growth of up to 2% by the end of 2024. Buying a second property in Singapore can be a fulfilling investment and may extend beyond the financial benefits.

Many Singaporeans see rental income as a gateway to achieve early financial freedom or create a sustainable income stream to augment their pension in retirement.

A second property can also help generate rental income that helps cover your daily bills or monthly mortgage instalments. If chosen carefully, you might also be able to rent it out as a holiday home to business travellers and vacationers to generate extra income.

Some might also consider the second home as a new place of residence for the family or a house for their kids in future. Some people might also want to buy a second home as an addition to their investment portfolio, which they may simply renovate and sell for a quick Return on Investment (ROI) before investing again elsewhere.

Buying a second property can be a risky move and may wreak your finances if you go out unprepared. You must consider whether you can afford the down payment, monthly mortgage repayment and ongoing expenses when deciding whether to buy a second property in Singapore or not.

If you are looking at the property to rent out, consider the area carefully and its market rental costs to get an idea of how much rental income you will be able to generate vs associated bills and expenses with the second home.

Can I own two properties in Singapore?

Yes, of course. If you already have a private property, then you can purchase a second and subsequent private properties in Singapore with no legal implications.

On the other hand, if your first property investment is a public housing, such as new or resale HDB flat, Design, Build and Sell Scheme (DBSS) flat or Executive Condominium (EC), then you are bound by certain restrictions for buying a second property.

It is imperative to check the latest Monetary Authority of Singapore (MAS) housing rules to know whether or not you are qualified to acquire a second property.

In Singapore, the government imposes several restrictions on your second property if the first property owned is HDB property. If you are residing in an HDB property, you are not eligible to buy a second property in Singapore until you meet the Minimum Occupancy Period (MOP) of five years.

This applies to both new and resale HDB flats. Also, if you already own an HDB flat, you are not allowed to purchase a second one. You must continue to stay in your HDB property even if you buy a second property elsewhere – i.e. unless you are permitted to sublet it by HDB.

Since ECs are only privatised after the tenth year, they are also HDB properties and hence also subject to the MOP rule. Note that such restrictions only apply for existing owners of HDB properties (public housing) and there are no such eligibility issues for private property owners considering a second property investment.

If you are a Singapore Permanent Resident (PR) who owns an HDB flat and looking to purchase a second or subsequent property, you must move out of the existing HDB flat within six months of buying the new private property.

Meanwhile, if you are a Singaporean citizen looking to purchase a private residential property, you don’t need to move out of your HDB flat or EC. You just need to fulfil the MOP requirements to be eligible to buy the second property.

Those who currently own private property and looking to purchase another EC or HDB must dispose of their private property within six months of acquiring the new property. For EC, it is at least 30 months.

Please note that it will make more sense to sell before purchasing as this will then be considered as your first property.

How much can I borrow for a second property in 2024?

The loan eligibility for a second property purchase may differ depending on the loans taken for previous property purchases. Your loan eligibility criteria is mainly based on the following criteria:

#1 Loan-to-Value (LTV) Ratio

The Loan-to-Value (LTV) ratio refers to the percentage of the property value (loan amount) you can borrow from the bank when taking a bank loan.

For your first property, the maximum loan-to-value (LTV) ratio for HDB loans is 80% (adjusted down from 85% to 80%) of the property value or purchase price.

This means you need to pay the remaining 20% as a down payment, which can be paid by cash, CPF OA funds, or a mix of both. For bank loans, the LTV ratio is capped at 75% of the property price or value, whichever is lower. This means your first down payment will be the remaining 25%, out of which 5% must be paid by cash.

The LTV ratio drops with each subsequent home loan. This means if you haven’t fully settled the mortgage on your first property, the LTV ratio available for your second or subsequent property purchases will be significantly reduced. It’s important to note that neither HDB nor banks are obligated to extend the maximum LTV ratio to you.

They retain the discretion to offer a lower ratio if deemed prudent based on their assessment. Factors such as your age and the number of properties you already own will also influence the LTV ratio that you are eligible for.

#2 Total Debt Servicing Ratio (TDSR)

Before you finalise buying your second property, it is wise to check your TDSR. This will help ensure that you don’t go over the top to finance the property purchase.

As per the Total Debt Servicing Ratio (TDSR) framework, borrowers are not allowed to surpass 55% (revised from previous 60% on 16 December 2021) of the gross monthly salary to pay off their debts, including property mortgage, student loan, car loan and credit card loan.

For example, if your fixed monthly salary is $10,000, then you can use only up to $5,500 to repay your debts. Therefore, with the TDSR limits in place, you might not be able to finance a loan for a second property if your monthly gross salary does not increase.

For HDB or bank loans taken for buying an HDB flat or a new EC, the mortgage repayment per month must not surpass 30% of a borrower’s monthly household income.

Before you finalise buying your second property, it is wise to check your TDSR. This will help ensure that you don’t go over the top with your finances.

Generally, the TDSR ratio should be around 30% to 40%. Anything above 50% is considered excessive and gives a warning sign that you are taking too much risk. Remember, if you fail to pay your home loan, you may lose both your properties.

How do I qualify for a second home loan?

Your LTV ratio may depend upon the property’s lease, location and condition, age, loan tenure and credit score.

Please note that HDB/banks do not have an obligation to approve the maximum LTV. They can opt to lower your LTV limit or simply reject your loan application straight away. There could be multiple reasons if that happens to you, such as:

  • The property’s remaining lease may be too low. Banks may offer an LTV ratio of 60% for leasehold properties with only 30-40 years left on their lease. But there may be exceptions to this condition; ultimately, it depends on the bank offering the loan.
  • The location and condition of the property are poor. Banks can also lower the LTV cap bearing in mind the property’s location and present condition. A property located in a red-light district or under lawsuits may also merit a lower LTV ratio.
  • Borrower’s age (more than 65) and loan tenure (exceeds 30 years) are too high. When buying a second property, the LTV ratio drops significantly to 45% if the loan tenure is up to 30 years. When the loan tenures go beyond 30 years or your 65th birthday, your LTV ratio declines to 35%. To enjoy the same LTV ratio, you must pay off your first property loan before taking out a loan for purchasing your second property.
  • You have a bad credit score or rating. Some banks may also take the credit score into account. If you have a bad credit score, you might likely be asked to pay a higher down payment and lower LTV than the allowable limit. Higher LTV loans are primarily reserved for borrowers with higher credit scores.

You can get in touch with one of our mortgage consultants to know about these potential reasons in more detail.

Which bank loan is best for buying a second property?

DollarBack Mortgage provides a recently updated and comprehensive comparison of various home loan rates in Singapore available for free on our website that can help homeowners looking to buy their second property.

Here’s a table showing banks with the best mortgage rates in Singapore (last updated May 2024):

BankInterest RatePackageRate Type
Foreign Bank2.80%2 Yr FixedFixed
Local Bank2.80%2 Yr FixedFixed
Local Bank2.83%2 Yr FixedFixed
HSBC3.83%3M SORAFloating
Standard Chartered4.00%3M SORAFloating
Maybank4.10%3M SORAFloating

Note that if the second property is going to be used to generate rental income, one should go for a floating rate to maximise the rental yield.

On the other hand, if the second property is going to be for the owner-stay with the first property being used to generate rental income, then one should go for a fixed rate since the general assumption is that the mortgage on the second property would be larger and stability in monthly instalments should be a key consideration.

How much cash down payment do I need to buy a second property in Singapore?

There is a huge difference between the required down payment when it comes to the first and second home purchase. In general, on the first purchase of private property in Singapore, you are required to make at least a 5% down payment in cash. However, it changes when you are purchasing a second property.

During the second property investment, if you have already paid up for your first home in full, then it will be considered as your first mortgage. This means the LTV ratio can be up to 75% and you will still pay only a 5% cash down payment of the property’s price.

If you are currently servicing your first property loan and require a second home loan simultaneously, the LTV ratio drops to 45% the initial down payment is set at 55%. This contrasts with your first home purchase, where only a 5% cash down payment is necessary when securing a bank loan. For the second property, buyers must provide a 25% cash down payment based on the property’s valuation limit. The valuation limit is calculated using the lower of the current market value of the property or the purchase price.

Can I use CPF to buy a second property?

Under the Multiple Property Rule, you can use your CPF (Central Provident Fund) to fund your second or subsequent property purchase.

You are allowed to use the excess savings in your Ordinary Account (OA) after you have met the prevailing Basic Retirement Sum (BRS) requirement.

This means, in 2024, you are required to set aside your BRS of $102,900 before you can use your CPF OA savings. In other words, you can finance your second property using your CPF funds if only you have gathered enough funds for retirement.

For example, if your BRS is $200,000, and your CPF OA has $235,000, then you can only pay another $35,000 from your CPF savings.

Read more: Are you buying a private property in Singapore? Find out everything you need to know about using CPF to pay for private property.

How much Additional Buyer’s Stamp Duty (ABSD) do I need to pay to buy a second property?

Introduced by the government, Additional Buyer’s Stamp Duty (ABSD) is a property cooling measure that imposes an additional property tax amount on the purchase price of residential property in Singapore. ABSD rates tend to increase with every subsequent property purchase and will have an impact on the cost to transact and eventually your ROI.

In addition to a lower LTV and a higher cash down payment, homeowners in Singapore will have to pay ABSD when they buy a second residential property. ABSD is levied on all property purchases for Singapore permanent residents (PRs) and foreigners.

However, Singapore Citizens need to pay ABSD for only second and subsequent properties (not first property purchase). For entities, ABSD rates would be similar on all purchases. Please note that the ABSD is payable on top of the Buyer’s Stamp Duty (BSD).

Depending on the nationality of the investor on the date of purchase, the ABSD would be applicable based on several variables across the number of properties owned. The current ABSD rates are reflected in the table below:

ABSD Rate w.e.f. 27th April 2023
 1st Property2nd Property3rd and Subsequent Properties
Singapore CitizensNot Applicable20%30%
Permanent Residents5%30%35%
Corporate Entities65%65%65%

Unfortunately, since the last revision of ABSD rates on 27th April 2023, homeowners are subject to higher ABSD rates for their second property purchase.

As per the current rates, a Singapore Citizen looking to purchase a second private residential property worth $1 million will now have to fork out an additional buyer’s stamp duty of 20% (i.e., $200,000).

Along with other stamp duties, the ABSD is payable within 14 days of completing the Sale and Purchase Agreement of any property. For agreements signed overseas, the stamp duties are to be paid within 30 days of receiving the relevant documents in Singapore.

Note that you can also use CPF OA savings to pay for the stamp duties. However, it generally takes more time (more than 14 days) to get the CPF savings disbursed, so might want to pay the stamp duties in cash first, and reimburse from your CPF later.

In 2024, single Singaporeans aged 55 and above can claim a refund of ABSD paid when they purchase a lower-value private property to replace their existing residential property. This ABSD concession will better support eligible seniors who wish to right-size by selling their first property within six months. This change in ABSD was announced by the Ministry of Finance during Singapore Budget 2024 speech and has taken effect from 16 February 2024. Previously, only married couples with an existing residential property can enjoy an ABSD refund on their replacement private property, under the ABSD concession for Singaporean married couples.

How can I avoid ABSD when buying a second property?

The hefty costs of ABSD can deter your plans of going ahead with purchasing a second property. However, there are ways to avoid ABSD and bypass the exorbitant 20% ABSD you have to pay. Let’s find about it in detail below:

Decoupling: Decoupling allows to sell the share of one of the owners to the other co-owner, which means the other co-owner becomes the sole owner. Now since the first owner no longer has any property under their name, they can save a hundred thousand dollars on their property purchase bypassing ABSD. Another way is to sell the property they own, and then utilise the proceeds in cash and CPF OA savings to acquire two different properties under the name of each partner. This transfer of ownership allows them (as a couple) to still own two properties.

However, there are additional costs (Buyer’s Stamp Duty, Seller’s Stamp Duty and legal fees) involved in decoupling. That is why it is crucial to analyse and evaluate if it is even worth decoupling for better financial health.

Buying a property for your child: Parents can either buy a property under the child’s name who is above 21 years of age or buy it Under a Property Trust for a child below 21 years of age. Since the child is legally the owner of the property, the parents become the trustee and thus responsible for paying the necessary levies (in cash only). The property will be recognised as the child’s first property and thus incurs no ABSD.

Industrial/commercial/overseas property investment: Since ABSD is levied when you purchase a residential property in Singapore, you don’t have to pay ABSD for an industrial/commercial/overseas property. Therefore, you can consider purchasing multiple commercial properties without paying any additional buyer stamp duties.

Lower Property Tax Bills With Revised Annual Value Bands

Singapore’s property tax landscape is set to evolve as the government implements revised annual value (AV) bands for owner-occupied residential properties, starting January 1, 2025. This adjustment comes as a strategic response to synchronise with market trends and offer some respite to homeowners amid rising living costs.

The update will see the lower threshold of AV bands increase from S$8,000 to S$12,000, while the upper band will see a significant rise to above S$140,000 from the current over S$100,000. These changes are designed to ensure that homeowners, particularly those in middle-class brackets, are not disproportionately taxed due to the considerable increase in property rental values over the past years.

While this recalibration is a move to address the cost of living, it is not expected to spark a surge in housing demand since property tax constitutes a minor component of the total cost of property ownership. The revision primarily aims to lessen the financial load on homeowners, with most HDB flat owners standing to benefit. There will be no change to the tax rates for non-owner-occupied properties, maintaining the intention of property tax as a form of wealth tax.

In essence, this policy tweak is seen as a fair adjustment, offering a cushion against the impact of inflated rental prices, and represents the government’s commitment to a targeted and equitable tax system.

Final Thoughts

Buying a second house in Singapore can be tricky and financially stressful at the same time. Think of it as an aspiration bigger than planning to sell and upgrade, as it will require deeper pockets and more in-depth planning.

If you are ready to discuss financing a second property, you can get in touch with one of our trusted mortgage home loan consultants. They will be able to provide more information on the latest rules and regulations regarding residential property financing and honestly advise you on whether or not you can afford a second property as an investment.

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