Overlooking the property valuation process in Singapore is one of the most common mistakes people make when purchasing a home. Some buyers don’t get a bank-indicated property valuation, which is an appraisal of the property’s value provided by a bank, and typically conducted by a professional valuation firm.
However, skipping this crucial step can have an undesirable impact on your ability to finance your property purchase.
Property valuation in Singapore affects two major factors—the loan quantum and stamp duties.
One thing to keep in mind is that the loan quantum—the maximum loan you can take out to buy the property—decreases as the valuation of the property drops. Simply put, the lower the valuation, the lower your loan.
At present, the maximum Loan to Value (LTV) ratio when buying real estate in Singapore is 75 percent of the property’s price or of its valuation—whichever is lower.
For example, say the asking price of the property is $1,600,000. However, the valuation places the property at $1,585,000. The maximum loan quantum will be 75 percent of $1,585,000, or $1,188,750.
If the valuation had matched the selling price, the maximum loan quantum would have been $1,200,000.
With a lower loan quantum, you’ll also end up having to pay a bigger downpayment on the property.
Second, stamp duties, such as the Buyer’s Stamp Duty (BSD), can increase if the valuation is higher. This is because stamp duties are based on the property’s purchase price or valuation—whichever is higher.
Say you are purchasing a property and the seller’s asking price is $1,480,000. However, a valuation places the property at $1,500,000. When you buy the property, the BSD would be $44,600, based on the valuation of $1,500,000.
On the other hand, if the BSD were based on the price, which is lower than the valuation, the BSD would be just $43,800.
Keep in mind that BSD rates may change. Here are the latest rates provided by the Internal Revenue Authority of Singapore following the release of the 2018 Budget:
As you can see, the property valuation can have a significant impact on your cash flow when purchasing real estate. It can result in having to fork out more cash for a downpayment or in a heftier stamp duty.
These issues aside, there’s the simple fact that having an accurate property valuation ensures you pay a fair price for what you get.
Unfortunately, it is difficult for a regular buyer to get an accurate valuation amount. Professional valuation firms—those the banks rely on—seldom work with the public. While you can get any number of estimates from property agents, it is ultimately the word of the valuation firm that banks will accept.
This also goes for data pulled up from the internet. Many property portals, as well as the Urban Redevelopment Authority, offer transaction histories of surrounding properties. While this is a good way to get a ballpark estimate of property value, it still isn’t accurate enough. A professional valuation firm may reveal numbers that are quite different from what online data suggest.
In such a case, you should know that different banks use different valuation firms. This means that it’s possible to get a higher or lower valuation by going to a different bank.
As this is a time-consuming process, buyers are better off consulting a mortgage consultant in Singapore. This type of consultant, also known as a home loan mortgage broker , can handle the process of contacting multiple banks to find the best-accepted valuation, at no cost to the buyer.
DollarBack Mortgage provides valuation advisory for the following loan applications:
When browsing around for a property purchase, keep in mind these facts about property valuations in Singapore.
If you need further help with property valuations in Singapore, contact a DollarBack Mortgage Consultant. Our consultants can help you discover the acceptable valuation of a property much faster and more effectively than if you tried negotiating with dozens of banks or sticking to armchair research.
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