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Key points to take note when buying your second property in sg

What Do You Need to Know if You Are Buying a Second Property?

Benjamin Su

Benjamin Su

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Most Singaporeans own at least one property, giving Singapore one of the highest rates of homeownership in the world. It is also not uncommon for homeowners to buy more than one property as a form of investment, generating rental income from it.

3 factors to consider before buying a second property

But before buying your second home, consider these three factors first: eligibility, affordability and intent.

1. Eligibility

Remember the Minimum Occupancy Period (MOP)

Those who already own a HDB flat cannot buy a second property until they meet the five-year MOP. The MOP applies to both new and resale flats in Singapore. 

Keep in mind that Executive Condominiums (EC) are only privatised after the 10th year. Until then, ECs are still HDB properties and hence bound by such rules as the MOP.

2. Affordability

How much can you borrow for your second property?

Banks assess your loan eligibility based mainly on these two criteria, which are:

1. Total debt servicing ratio (TDSR)

The TDSR states that you should not have more than 60% of your gross monthly salary devoted to servicing your loans in a month. This can include all types of debt, including car, home, personal, and even student loans.

In the case of loans taken to purchase HDB flats, the monthly repayment instalment cannot exceed 30% of a borrower’s gross monthly income.

2. Loan-to-value (LTV) ratio

In Singapore, HDB loans have a maximum LTV of 90%, whereas for bank loans it is 75%. However, HDB and banks are not required to offer you the maximum LTV. They can choose to lower it if they think it would be more appropriate. Age and the existing number of properties also play a part in the LTV ratio.

The minimum cash down payment

For your second property, you will need to pay up to 25% of your property’s down payment in cash. This will be measured against the property’s valuation limit, which is determined by the property value or purchase price, whichever is lower and any excess above the valuation.

The Additional Buyer’s Stamp Duty (ABSD)

In addition, Singaporeans will have to pay a 12% ABSD on either the property value or purchase price of a second residential property, whichever is higher. Permanent Residents (PR) will pay 15% ABSD for a second residential property and foreigners will cap off at 20% after July 2018.

Below are the various ABSD rates for buyers of different profiles and depending on the number of properties they own:

Citizenship1st property2nd property3rd property and above
SingaporeansNil12%15%
Singapore PRs5%15%15%
Foreigners20%20%20%

Using CPF for your second property

CPF can be used to buy a second property. However, if you have already used your CPF for your first property, you may only use your CPF Ordinary Account savings for your second property after setting aside the Basic Retirement Sum (BRS).

However, there is a limit on the amount of CPF savings you can use to buy private residential properties at 120% of the valuation limit. Once you have reached the Withdrawal Limit, you will not be allowed to use further CPF savings, and you will need to pay the remaining home loan in cash.

3. Intent

Decide whether the new property will be an investment or a second home

Do you plan on using the second property for an investment or as a primary residence for your family members? This is because the type of usage will impact your property tax rate. Currently, the property tax for owner-occupied residential properties ranges from 0% to 16% on a tiered basis, while properties that are rented out have a tax of between 10% to 20% of annual value. The annual value is determined by IRAS and is based on how much rental income the property could generate per year.

If the second property is an investment, ensure there is a clear exit plan for the asset

It would be wise to develop a strategy for the second property, considering factors such as: how long you intend to hold it, when and how you plan to cut losses if it becomes a liability due to low rental income, and what kind of capital gains to expect.

Buying a second property in Singapore just to “make more money” is not a sound plan. You should work out the potential rental yield and capital appreciation, and determine the probable Return On Investment.

Is now the right time to buy it?

Whether you are looking for a specific type of property to fit your purpose or budget, Ohmyhome’s agents can help to act as an intermediary and help address any concerns that you may currently have.


Frequently asked questions before buying a second property

1) Can I manage the downpayment if I have an outstanding home loan?

Yes, buying a second property requires a substantial cash outlay. So it may be a good idea to have ample savings before setting out to get one. Speak to Ohmyhome’s agents for a comprehensive evaluation.

2) What is the most suitable property for rental?

The type of property will determine the type of tenant you attract. For example, a shoebox unit on Orchard Road will probably attract single, affluent expats. If you’re looking to rent out your property,You can speak to Ohmyhome’s agents for a comprehensive evaluation of all the available options.

3) Will the government decide to build a skyscraper in the future next to my second property?

You may check the URA’s Master Plan which is the statutory land use plan that guides Singapore’s development in the medium term over the next 10 to 15 years.

4) Is it worth getting a second property near good schools?

Homes within a 2 km radius of a prestigious primary school can command large price premiums due to their demand. Speak to Ohmyhome’s agents for more information now.

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