Considering these requirements and a typical investor’s profile, the average cash outlay required to invest in a second property in Singapore is a whooping S$700,000. Here is a simple illustration to show the impact of taxes in Singapore when purchasing a second investment property:
How Can One Save on ABSD and Still Own a Diverse Portfolio of Properties?
Even if one door closes, another opens. Here are five ways that sophisticated investors can consider to reduce the impact of ABSD on your property value:
Venturing into the international property market has generally been a preferred choice amongst Singaporean investors as markets abroad can offer lower barriers to entry, allowing investors the ability to diversify their portfolios and own investment properties abroad efficiently. On one hand, it typically requires a significantly lesser cash down payment as compared to purchasing a second property in Singapore, and diversifying has naturally always been a healthy solution when balancing owns own portfolio, spreading the risks across markets, especially in the long run. Not only that, international markets can offer an array of opportunities that could better suit the investors’ appetite and requirements.
Diversification – Expand Your Horizons and Look Overseas
In such as situation, our preferred choice is to look into the international markets and search for opportunities in trustable projects. In our previous article, we highlighted key locations where Singaporeans are buying across the globe, as well as the main reasons why Singaporeans choose to look overseas. In this article, let us compare Singapore’s market with exquisite London.
Rich in culture and history complemented with world-class museums, world-renowned neighbourhoods and a variety of shopping and food options, London is unlike any other city in the world. The city’s urban fabric gilds an alluring charm irreplaceable in the hearts of locals and travellers, well-loved for its authentic British lifestyle and dynamic zest. It is home to the world’s leading financial hub with some of the best educational institutions available globally.
In Singapore’s context, we share the same language and common law system which makes transactions safe, enforceable and familiar, and to no doubt it is one of the most favoured locations for Singaporean investors. Furthermore, London held one of the strongest track records in the world regardless of the economic conditions, while offering excellent infrastructure and a transparent legal system. One stark difference that sets London and Singapore apart for second-home investors is the tax regulations applicable.
UK Stamp Duty
One thing to note is that a potential 2% stamp duty surcharge is applicable for non-resident buyers from April 2021 onwards. For investors who are purchasing their first residential property worldwide, the supplementary 2% increase would be added onto the standard rate. Further clarifications would be made by the UK government, so be sure to stay updated on the revision.
The stamp duty for a second property purchase applies to everyone regardless of citizenship, which levels the playing field for UK residents and overseas property buyers.
Taking the same example of a property valued at S$1 million into London’s market with an LTV of up to 70%, a much lower initial cash outlay is required for your London investment as compared to Singapore.
The total cash outlay required for a property of the same value in London is estimated to be S$383,000 as compared to a whooping S$700,000 in Singapore. Considering the rental yields in both contexts, Singapore properties can typically generate a 2.5% on average, whereas London rental yields can range from 3.5% – 5%. With a lower cash outlay and the ability to retain the most out of the property value, looking into the London market can be a much digestible option for investors who prefer a less hefty down payment.
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