3 Questions to Ask Before Buying your First Condominium
Are you excited to finally achieve your lifelong dream of buying your first condominium?
Before you dash off towards the next showroom and book your dream unit, do hang on for a moment and consider these 3 questions first!
Ask yourself would you like a brand new under construction condominium or a resale condo. Find out what are the benefits of purchasing a brand new apartment!
1. Should you purchase a 99-year leasehold or freehold condominium?
Your preferred location can very well determine the type of condominium you can get.
Do you know that there are actually no freehold condominiums at all in some Eastern zones such as Punggol, Sengkang, Tampines and West regions like Jurong West and Jurong East as well as Choa Chu Kang?
Another interesting fact is that private apartments built over underground MRT stations (mixed developments) as well as reclaimed land are state land and thus only offer 99-year lease. This means that condominiums built in places like Marina Bay or above Bukit Panjang MRT (Hillion) are available as 99-year leaseholds only.
On the other hand, certain prime areas such as districts 9 to 11 contain mostly freehold properties. Less than 50 % of private housing in Singapore have freehold residency and the majority of freehold residences are clustered in traditional prime districts of 9,10 and 11. District 9 and 11 are near Orchard Road, where extravagant condos such as 21 Angullia Park, EDEN and 8 Hullet are located in. District 10 is also highly sought after by private property hunters as the locations include Holland Road, Draycott Park as well as Nassim Road, where the likes of Ardmore Park can be found.
2. Private Condominium Vs Executive Condominium?
Now that you have narrowed down your choice of location for buying your first private condominium, the next question would be— do you want to own an EC (Executive Condo) or a Private Condominium?
Private condominium units are independently owned while common areas such as shared facilities, hallway and elevator are co-owned by all unit proprietors. In contrast, ECs is considered as a cross-breed between private and public housing. Developed and overseen by private developers, the land cost is paid for by the authorities. This is also the reason why ECs are typically 25% less expensive than private condos.
Other than the obvious differentiating factor of price, it is worth considering whether you are buying your first apartment as a form of investment or as lodging. If you are buying the house for your family and the location is ideal, it would be good to start with ECs first rather than private apartments. The facilities that you enjoy in an EC are similar to that of a private condo but the EC is subsidized by the government, which would give you more leeway in managing your cash flow. Moreover, if you are a Singaporean and have a household monthly income of less than $14k, ECs are highly preferable as they may increase in property value after the minimum occupancy period (MOP) of 5 years.
However, if you are buying your 1st private property as a form of investment, you should definitely consider private condos instead. Whether you wish to sell or rent the property immediately after you purchase the apartment, it’s entirely up to you as there is no MOP. Not to worry too if your income is too high, as there is no income ceiling too. The best perk about owning a private condo is that its property value does not diminish due to the remaining lease. The stable property value would make the private condo a suitable long term investment.
3. Are you able to finance for it?
Great, now that you have decided whether you prefer an EC or a private condo, it’s time to review how you are going to pay for your 1st property!
Here are some basic components to consider when financing your loan:
a) Agent Fees
Take note that there is NO agent commission fees when you purchase a property, I do not charge anyway. However, to be on the safe side, since the commission fees you pay to an agent is not regulated by law, it is highly recommended to check with the agent BEFORE you engaged on how much he/she charges. The market rate is typically 1-2 percent of the buying price for selling a property.
b) Buyer’s stamp duty(BSD)
BSD is a form of tax you have to pay when you purchase property located in Singapore. How much do you need to pay though? It really boils down to the market value or the buying price of the condominium.
Referring to IRAS’s BSD rates after 2018, the first $180,000 of your purchase price/market value of property would be charged at 1%, the next $180k would be 2%. Subsequently, the following $640,000 would cost 3% and the remaining amount would be subjected to 4 %. Still confused? Head over to their stamp duty calculator to find out how much you have to pay exactly. If you have 1 or more property, you may be subjected to Additional Buyer Stamp Duty (ABSD). Check out how to avoid ABSD in Singapore LEGALLY.
As this is your first condominium (assuming you have no other properties to finance), the minimum downpayment in cash ranges from 5-10%. If you are under the age of 65 and the loan tenure is below 30 years, it will be 5%. However, if you are above 65 years old and the loan tenure stretches beyond 30 years, you would need to fork out minimum 10% in cash up front.
i) Legal fees
Privately owned properties do incur legal costs ranging from $2000 to $4000. So, choose your lawyer wisely. However, we do absorb legal fees for our clients.
ii) Cost of property
If you are looking at private condominiums, do keep in mind that it cannot be paid for in CPF and there are no grants from HDB. Thus, your financing option would be limited to banks if you do not have sufficient cash on hand.
For ECs, you can get up to a $40,000 CPF grant from HDB depending on your total monthly household income. Of course, you do need to be a first-timer Singapore citizen or PR in order to enjoy the grant. In other words, you must not have owned or sold any HDB flat or taken the CPF housing grant to make any housing transactions or received any form of housing subsidy prior to buying this EC. Do note that the CPF grant can only be used for subsequent payments toward the purchase price of the property or be used to offset balance down payment. So, check that you have sufficient cash to pay for the initial downpayment and the subsequent mortgage instalments before rushing to book that dream unit!
Buying your first condominium property is definitely not an easy task and it is a long tedious process.
There are several things to consider, ranging from location, investment quantum, exit strategy, URA Masterplan and several others.
The bare minimum is to ask yourself the main 3 questions first; type of property to buy, preferred location & Finances.
Get a head start and speak to our consultants, your one-stop source of information!