Common Property Terms You Should Know as an Investor in Singapore

Singapore has one of the highest home ownership in the world, with almost 90% of its population owning a property1. Below are the 10 common property terms that you should know – as a property owner or an aspiring one.

1. BSD – Buyer’s Stamp Duty 

  • A tax that property buyers have to pay when they buy a property. The amount of tax depends on the property price. 
  • Foreigners would need to pay 20% of any property purchase and only exempted if you are married to a Singaporean and do not own any residential property. 

For residential properties, tax levied as below2

 

2. ABSD – Additional Buyer’s Stamp Duty  

A tax that is levied on top of Buyer’s Stamp Duty (BSD), based on the selling price of the property.

ABSD Rates on or after 16 Dec 20213

3. SSD – Seller’s Stamp Duty 

SSD is payable on all residential properties and residential lands bought on or after 20 February 2010 and sold within 3 years. The rate of SSD depends on:

  • The type of property sold or disposed
  • The date of purchase or acquisition
  • The date of sale or disposal

 

4. MSR – Mortgage Servicing Ratio 

MSR refers to the borrower’s gross monthly income that goes into paying all property loans. MSR is being capped at 30% of one’s gross monthly income. It only applies to loans for the purchase of an HDB flat or an executive condominium.

 

5. TDSR – Total Debt Servicing Ratio 

TDSR refers to the borrower’s gross monthly income that goes into paying all monthly debt loans, including car loans, study loans, overseas property loans etc. TDSR should be equal to or less than 55%. 


6. LTV – Loan-To-Value

  • The LTV limit determines the maximum amount an individual can borrow to finance a housing loan, hence it determines how much one needs to pay upfront in cash and/or from your CPF Ordinary Account (OA) for your down-payment. LTV also refers to the loan amount as a percentage of the property’s value. 
  • There is a key difference between HDB housing loans and bank loans for LTV.
  • HDB loan has a maximum LTV ratio of 85%. It is only available for Build-to-Order (BTO) , Sale of Balance Flat, Re-offer of Balance Flat and resale flat purchases. Downpayment can be made via cash or from your CPF OA, or a combination of both. There is no minimum cash outlay.
  • On the other hand, bank loan has a maximum LTV ratio of 75%. 5% must be paid in cash. The rest of the 20% can be paid using a combination of cash and CPF OA Savings. 
  • However, there are caveats as to why one may not qualify for the maximum LTV in all circumstances, such as if the loan tenure exceeds 30 years (or 25 years for HDB flats), or if the loan period extends beyond the borrower’s age of 65 years old. 


7. Loan Tenure

  • The period of time that you may take to fully repay your loan.
  • Maximum loan tenure for housing loans is capped at:
    • 30 years for HDB flats
    • 35 years for non-HDB properties

 

8. A-I-P – Approval in Principle

  • Sometimes also known as an In-Principle Approval (IPA), is an agreement with a bank to pre-approve your home loan based on your financial health and credit history. There is no real loan that occurs when you get an IPA. While it is a guarantee, it is not a commitment. 
  • It is valid for 30 days, during which you can hunt for a place that is within your budget. 


9. OTP – Option to Purchase 

  • It is an agreement between the seller and buyer of a property. Essentially this is used for a potential buyer to “reserve” the property within a stated period of time. 
  • The Option Fee is usually 1% of the selling price of the property, but it is not fixed and up to negotiation between both parties. 
  • The Option period is usually 14 days, but it is not fixed and up to negotiation between both parties. 


10. LOI – Letter of Intent

It is a preliminary agreement between the buyer and the seller before a transaction is finalized.  In the Singapore context, such an agreement is between a landlord and a tenant to indicate interest in renting a property.

 

 1Department of Statistics Singapore, Households – Statistics of resident households are compiled by the Singapore Department of Statistics, 2021

2Inland Revenue Authority of Singapore, Buyer’s Stamp Duty (BSD), 2022

 3Inland Revenue Authority of Singapore, Additional Buyer’s Stamp Duty (ABSD), 2022

 4 Source: DBS Singapore, Glossary | DBS Singapore, 2022

 

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Comparing the TER cost for 20 years

Here’s the difference a low cost advantage makes to cost savings

Here's how much you pay

$190,272.13
Selected TER 1.00% p.a.

$99,912.57
LionGlobal All Seasons Fund 0.5% p.a.

By investing a fund with low TER

You may save $90,359.56 over 20 years based on an initial investment of $1,000,000 compared with a TER of 0.5% p.a.

It is enough to provide for a monthly expenditure of $3,000 over the next 2 years and 6 months.

Here's how much you pay

$271,950.61
Selected TER 1.50% p.a.

$99,912.57
LionGlobal All Seasons Fund 0.5% p.a.

By investing a fund with low TER

You may save $172,038.04 over 20 years based on an initial investment of $1,000,000 compared with a TER of 0.5% p.a.

It is enough to provide for a monthly expenditure of $3,000 over the next 4 years and 9 months.

Here's how much you pay

$345,744.19
Selected TER 2.00% p.a.

$99,912.57
LionGlobal All Seasons Fund 0.5% p.a.

By investing a fund with low TER

You may save $ 245,831.62 over 20 years based on an initial investment of $1,000,000 compared with a TER of 0.5% p.a.

It is enough to provide for a monthly expenditure of $3,000 over the next 6 years and 9 months.

TER (Total Expense Ratio) is the sum of various identified operating expenses charged on an ongoing basis to the fund’s assets as a percentage of the fund’s average net asset value calculated over a 12-month period at the close of the annual and semi-annual financial statements of the fund for all the p.a. tabs (1.0%, 1.5%, 2.0%).

The above scenarios are for illustration purpose only. Past performance, as well as any prediction, projection or forecast on the economy, securities market or the economic trends of the markets are not necessarily indicative of the future or likely performance of the funds. Calculations based purely on costs with no market movement or investment returns.