Buying second home in Singapore

Buying second home in Singapore

Debbie A. Lubis, Contributor, Jakarta

The increase in the number of Indonesian students pursuing their studies in Singapore have partly contributed to a significant increase in apartment purchases by Indonesian families in the neighboring country.

Henry Tjokrohartono, president director of marketing agent PT Jerrytan Residential Indonesia, said its close distance and the good quality of its educational system made Singapore among the most favored places for Indonesian students to pursue their studies.

Besides education, he said, many rich Indonesians also buy apartments in Singapore for investment purposes.

"It's only one and a half hours by plane from Jakarta. Many people prefer buying an apartment in Singapore instead of in China or Australia because it is just like visiting their neighbor," Henry said.

Indonesians mostly purchase three-bedroom apartments as their second home in the neighboring country. With about S$500,000 (about Rp 2.5 billion) or $600,000 they can get two-bedroom or three-bedroom apartments," Henry said.

Choosing a locations and types of apartments are the most important factors that investors should contemplate before making any decision. The investors should also consider a series of legal, financial, governmental and tax issues to be looked at.

Indonesians mostly prefer to buy in areas near popular shopping area Orchard road and locations nearer to schools or universities.

The law in Singapore allows a mother or a grandmother of a student to have a temporary stay permit to accompany children who are studying. "One of the parents may stay longer so there is no need to go back and forth to Singapore so often," Henry said.

He added that high interest among Indonesians is also because an ownership of Singaporean property is a trouble-free. Singaporean government has provided numerous incentives for the investors while the developers run the business with strong legal basis.

One of the advantages of buying Singaporean apartments is that the buyer is only charged for the stamp duty (government tax), which is 3 percent. By comparison, in Indonesia, an apartment purchase is subject to the 10 percent value-added tax, the 20 percent luxury tax, and another 5 percent for something called a conveyance tax (ostensibly to cover the costs of administration in the ownership transfer from the seller to the buyer).

The investors can resell their asset to people regardless their nationality and for the past year, the Singaporean government has exempted non-Singaporeans from the capital gains tax. "As their children graduate, the parents sometimes sell the apartments. If they buy the property for $1 million then resell it for $1.2 million, they will not be subject to tax for the capital gain of $200,000. This is a very attractive offer for investors.

The buyers should provide 40 percent of the purchase price as the down payment while the banks will carry the other 60 percent. Bank interest in Singapore starts from 1.65 percent per year, a huge relief compared to Indonesia's 18 percent per year at most banks.

There are at least eight agents in Indonesia that deal with Singaporean property. Consulting local agents could be helpful for potential buyers because they might discuss budget, criteria, and other apartment needs that clients require and will act as a solicitor that will take care of all legal matters for the clients.

Investors are offered various types of apartments, from small one-room apartments, to average-size apartments with two or three bedrooms and to the luxury ones -- called penthouses -- with swimming pools and lush gardens. All of them feature excellent security and common facilities such as a swimming pool, gymnasium and secured car parking.

" It is very convenient to invest in Singapore because it has explicit legal procedures so that my investment is protected," 52-year old Bandi Tantono, a businessman who lives in West Jakarta, said.

He, currently, owns three apartments and purchased them through an "off-the-plan" mechanism (purchasing before construction has commenced). "I always select a reliable developer with an established track record of good, completed properties because there is a risk that the project may never get started or completed," Bandi said.

Bandi said that before making an investment, investors should take note that the closer a location to the central business district (CBD) the higher the investment return, will be.

A residential property that is not well located will be harder to rent out than a property in a better location. Lease periods are usually from one year to three years.

According to data provided by Jones, Lang, Lasalle property consulting company, sales in the residential sector such as condominiums and apartments reached a total of S$136.63 million or about 53 percent of the market value of properties successfully auctioned off during the year.

This reflects an increase of 69 percent in value over the low performance point of $80.88 million achieved for 2001.

"Buying interest in the condo/apartment homes segment was seen mainly at the lower end of the price scale, with units pegged between $600,000 to $800,000 being most sought after, whilst the higher end segment saw selective buying spurred by location and pricing criteria," Goh Chak Boon, head of auctions of Jones Lang LaSalle said.