How to buy commercial property in Singapore: Full 2024 Guide
If you’re thinking of new ways to invest and diversify your assets, you might be wondering how to buy commercial property in Singapore. With a very competitive economy and business friendly outlook, Singapore could be a smart bet for investors and business owners.
This guide covers all the basics, including key questions like: can foreigners buy commercial property in Singapore? And what are the costs involved? Plus, because buying property is likely to mean needing to send high value payments, including overseas transfers, we’ll touch on Wise as a specialist provider of low cost, fast and secure international money transfers.
Types of Commercial Properties Available in Singapore
A commercial property is any property not intended for residential use. Land and properties are zoned, into residential, commercial, and mixed use categories. The rules about who can own and develop these sites, and what they can be used for, vary widely depending on the zoning. It’s helpful to know that properties classified as commercial and residential - that is, mixed use sites - typically fall into residential zoning rules. This is because the buildings are likely to be primarily residential in nature. As there are stricter rules about foreign ownership of residential property in Singapore, this can mean that some properties which have commercial functions can not be purchased freely by foreigners. More on that later.
You can broadly split down the types of commercial property available in Singapore into 3 different types. These are fixed according to what the property is suited to or used for:
| Type of Singapore commercial property | Examples |
|---|---|
| Commercial and industrial properties | Splits into 2 types - offices and warehouses are classified as B1 properties, while factories and manufacturing sites are B2 |
| Retail | Stores, restaurants, bars and other consumer focused locations |
| Hotels | Hotels, hostels and similar hospitality properties |
This guide is intended for information only. If you’re unsure about the rules relating to any property purchase in Singapore, take professional advice based on your specific situation.
Where to find commercial property for investment?
If you’re just starting to look into buying commercial property in Singapore, you’ll want to do some research to learn more about the types of property commonly available, the costs and the rules. Here are a few popular umbrella websites which could help your search:
Can foreigners buy commercial property in Singapore?
As a general rule foreigners are able to buy some properties without special permissions, including:
Shophouses which are approved for commercial use
Hotels and hostels
Industrial and commercial properties
Rules regarding foreign ownership of Singapore land and property do change from time to time, so you’ll need to check the latest on the Singapore Land Authority website, or get professional advice from a property lawyer.
Eligibility & Legal Requirements
As we've seen, foreigners can buy some commercial property, but there are fairly strict rules about this. Foreigners can not buy residential property without meeting eligibility requirements, and this extends to properties and land which is viewed as mixed residential and commercial in purpose. Mixed use sites are likely to be deemed as residential in nature, and so foreigners must get government permission to buy them.
If you’re considering buying any property in Singapore and you’re not a citizen or permanent resident, you’ll need to check the latest rules and updates with the Singapore Land Authority and the Urban Redevelopment Authority, and then take legal advice to make sure any property you’re considering is appropriate.
Step-by-Step Buying Process
Buying a commercial property in Singapore may work differently depending on the specific property, how it is zoned, the lease length, your nationality and your residence. It’s crucial that you get a good local legal support team including a conveyancing lawyer who has worked with commercial buyers in your position before. They can guide you through the process in detail. To give an overview, though, let’s look at the common steps you’ll need to take:
Research your options
Start with the basics. You’ll need to check your budget amount, including understanding additional costs on top of the purchase price like stamp duty, taxes and legal fees. You can then start to look at the sorts of properties and locations which might suit your needs. Umbrella commercial property websites are a good place to view current market trends and availability to help you build a picture of what might work for you.
Engage an appropriate legal support team
Before you go further, look out for a local conveyancing solicitor and an agent who can help you find the best property for your needs, and navigate the system. If you’re buying as a foreigner, finding someone who has worked with non-resident clients can help, as they’ll understand the sorts of issues you’re likely to run into.
Find an appropriate property and negotiate the selling price
You and your agent can now start to narrow your search down, to find the right place for your investment. Once you have identified a suitable unit, your agent can help you negotiate the selling price.
Complete the Option to Purchase
As part of this negotiation, the seller will issue an Option to Purchase (OTP) which gives you a deadline under which you must finalize your transaction and complete the sale. You’ll need to pay a small deposit at this stage, which the agent can help you negotiate.
Conduct searches and due diligence checks
Your legal team will complete full searches and due diligence processes. This can take a little time, depending on the nature of the property. You may also want to have the property surveyed to ensure it is in good condition and to understand any maintenance issues.
Exercise the Option to Purchase
Once all is in order you can exercise your OTP to set a completion date. Again there will be another small deposit to pay, and you’ll need to sign initial paperwork with your legal representative to protect your interests in the sale.
Complete and pay remaining amounts due
The final step in the process will be to agree on a completion date and clear down your remaining debts. You’ll need to pay the seller, as well as any required taxes, stamp duty and legal fees, before the property will be transferred into your name.
What to consider before investing in a commercial property
Buying commercial property can be a common choice for investors - and particularly foreign investors as the overall taxes you pay can be lower on commercial property compared to residential. However, this is a big commitment so you’ll still need to think through the decision carefully. Some points to consider include:
Affordability
Commercial property loans are usually no higher than 80% of the value of the property, which means you need a high deposit amount in cash. You’ll also have to meet debt servicing requirements, which means being able to demonstrate that you can easily repay the loan from your regular income. This can prove a challenge - particularly given how high the cost of some Singapore property can be.
Location and intended use
As we’ve seen, properties and land are zoned - and the zones they’re in can impact their potential uses. You may not be able to change the use of a property once you’ve bought it - so checking out all of this information in advance is essential.
Location is also super important in a competitive commercial environment. Being somewhere with adequate footfall and local links, to make sure you can get reliable custom, is the only way to make sure your commercial property can be used successfully - by you or any tenant you let it to. Do your research to make sure the property location supports the likely end use of the unit before you buy.
Stamp duty, property tax and other charges for buying commercial property in Singapore
When you set your budget for buying a commercial property in Singapore you’ll also need to take into consideration the taxes and other costs which are imposed when buying commercial properties. These are different compared to buying a residential property, so get some legal advice if you’re new to buying commercial units here. We’ll walk through an overview to give you a flavor.
Buyer’s Stamp Duty
Buyer’s Stamp Duty (BSD) is paid on a progressive system, which means that the higher the price of the property you’re buying, the higher the overall blended BSD percentage will be. Here’s an overview for Singapore commercial properties:
| Purchase price | Buyer’s Stamp Duty |
|---|---|
| First 180,000 SGD | 1% |
| Next 180,000 SGD | 2% |
| Next 640,000 SGD | 3% |
| Next 500,000 SGD | 4% |
| Next 1,500,000 SGD | 5% |
\*correct at time of research - 25th November 2024
Additional Buyer’s Stamp Duty (ABSD)
The good news is that ABSD does not apply on commercial properties. This is a particular advantage for foreign investors who pay a higher ABSD compared to local and PR buyers. This rule is designed to encourage investment in Singapore without depriving local citizens of appropriate housing, and without driving up the costs of housing unnecessarily.
Property Tax
Commercial property in Singapore is subject to property tax on an annual basis. This is paid at 10% of the annual value of the property.
The annual value is calculated as the estimated gross annual rent of the property if it were to be rented out, excluding furniture, furnishings and maintenance fees. Annual values are decided by comparing with market rentals of similar properties and not on the actual rental income received.
Goods & Services Tax (GST)
GST must be paid on the purchase of your commercial property in Singapore. While the rate of GST does change from time to time, it’s another 9% of the purchase price at the time of writing. This becomes due on completion so you must build this into your budget before you buy.
Pros and Cons - Buying commercial property vs residential property
If you’re thinking of buying a commercial property in Singapore as an investment, you may be torn between a residential property and a commercial unit. There are pros and cons to both, so which suits you best will depend on your intentions and budget, among other things. Here are a few things to think about.
Pros and Cons of Buying Commercial Property in Singapore
| Pros of buying commercial property | Cons of buying commercial property |
|---|---|
✅ Lots of commercial property choices, across different building types, budgets and locations ✅ Foreign buyers can purchase some commercial property without requiring advance permissions | ❌ Purchase costs can be extremely high ❌ Additional costs, such as BSD and GST need to be build into your budget ❌ Foreigners can’t buy mixed commercial and residential properties without permission |
Pros and Cons of Buying Residential Property
| Pros of buying residential property | Cons of buying residential property |
|---|---|
| ✅ You can choose to live in the unit or rent it out ✅Many different property types available depending on your needs ✅ Use your CPF to partly finance your purchase if you’re eligible ✅ Singapore citizens and PR are able to buy any type of property | ❌ Foreigners can not buy some property types ❌ ABSD applies which is high for foreigners in particular ❌ Values of property are subject to market changes |
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If you’re buying a commercial property for your business from overseas, you will need to make sure you limit or avoid the extra costs which can be associated with currency conversion, to get the best available deal.
With a Wise Business account, you can securely handle overseas property purchases and large transfers at the mid-market rate with affordable fees from 0.33%. There are even discounts on the costs you pay when transferring over the equivalent of 20,000 GBP in a month (about 34,000 SGD). That could mean you save up to 1.7% on your costs while still accessing the mid-market exchange rate with no hidden costs.
Wise has a specialist team on hand to support high value transfers, so you can get help along the way if you need - with high payment limits to allow you to transact freely when buying properties.
Conclusion
Singapore’s vibrant economy makes commercial property a popular investment for some local and overseas buyers and entrepreneurs. Foreigners can buy many different property types without needing any special permissions - although some property types, including mixed residential and commercial buildings, are trickier for a foreign buyer to access.
Before you commit to buying a commercial property in Singapore you’ll need to do your research and engage a great local legal team who can help you navigate the process. This guide outlines the basics to start you off - and don’t forget that you may be able to get a better deal when paying for your purchase from abroad if you choose Wise.