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Comprehensive Guide To Buying A Commercial Property in Singapore

Commercial Property Singapore
Estimated Reading Time: 5 minutes

Whether you’re expanding your business or diversifying your investments, buying commercial real estate in Singapore can be rewarding; but it’s important to navigate the market wisely. In this guide, we’ll highlight key factors to consider when buying commercial property in Singapore.


Types of Commercial Properties

Retail Commercial Properties

Retail

These include a wide array of venues such as shopping malls, pet shops, gyms, restaurants, lively bars, and traditional shophouses. Each offers unique opportunities depending on your business type.

Industrial Commercial Properties

Industrial and Commercial

Industrial buildings are slightly different. They are categorised into two main types: B1 and B2. 

B1 spaces are typically used for offices and warehouses, perfect for businesses that need a blend of professional and storage space. 

On the other hand, B2 spaces are more suitable for heavier industries like manufacturing plants and factories.

Hotel Commercial Properties

Hotel

These properties cater to the hospitality sector, ranging from luxurious hotels to budget-friendly hostels, each offering different levels of service and amenities.


Foreign Ownership of Commercial Property in Singapore

In Singapore, the commercial property market is open and accessible to foreigners. There are no existing restrictions on purchasing various types of commercial properties. 

Whether you’re interested in retail spaces, industrial sites, or hospitality venues, the rules are the same for everyone. Foreign buyers enjoy the same privileges as local buyers, meaning there are no income caps or special eligibility criteria to meet. 

This levels the playing field, allowing Singapore to be an attractive location for international investors looking to expand their real estate portfolios.


7 Financial Considerations When Buying A Commercial Property in Singapore

Thinking about buying a commercial property in Singapore? We’ve compiled a list of financial considerations for you to make the right decisions. In this section we’ll dive into the seven key aspects that’s important to the buying process.

1. Property Tax

Commercial properties are subject to a property tax rate of 10% of the annual value.

2. Buyer’s Stamp Duty (BSD)

BSD is mandatory for all property purchases. Here’s a breakdown of the rates for residential and commercial properties.

Purchase price or market value of propertyBSD for residential propertiesBSD for non-residential properties
First $180,0001%1%
Next $180,0002%2%
Next $640,0003%3%
Next $500,0004%4%
Next $1,500,0005%5%
Remaining amount6%
Figures retrieved from IRAS

3. Total Debt Servicing Ratio (TDSR)

Although the Additional Buyer’s Stamp Duty (ABSD) does not apply to commercial properties, TDSR limits monthly debt repayments to 55% of your income, influencing your mortgage and property choice.

4. Seller Stamp Duty (SSD)

SSD applies specifically to industrial properties

Date of purchase / acquisition or date of change of zoning / useHolding periodSSD rate (on the actual price or market value, whichever is higher)
On or after 12 Jan 2013Up to 1 year15%
Between 1 – 2 years10%
Between 2 – 3 years5%
More than 3 yearsNo SSD payable

5. Usage of CPF to Buy Commercial Property in Singapore

Unlike residential properties, CPF funds cannot be used for purchasing commercial properties; both the down payment and mortgage must be paid with cash.

6. Bank Loan Amount

You might be eligible to borrow up to 80% of the property’s value, but remember that commercial loan terms, including interest rates and tenures (capped at 30 years), differ from residential loans and vary across banks.

7. Goods and Services Tax (GST)

Commercial properties are also subject to a 9% GST charge, which cannot be financed through CPF or bank loans. GST applies to furniture and fittings within the property as well.


Other Key Factors to Take Note When Buying A Commercial Property in Singapore

Factors to Take Note When Buying A Commercial Property in Singapore

8. Type of Commercial Property

Buying commercial properties in Singapore present investment opportunities, each coming with their own set of traits, costs, and potential risks.

For example, shophouses are a popular choice for their old-school aesthetic but can be on the pricier side. Commercial properties also come with usage restrictions; some are strictly for commercial use, while others can accommodate both residential and commercial activities, significantly influencing the investment appeal.

All in all, when choosing a commercial property, it’s important to carefully assess the property’s potential for generating rental income or capital appreciation — property that not only aligns with your investment goals but also offers prospects for returns will help you maximise your investment.

9. Intended Use of Property

Similar to residential properties, commercial properties in Singapore are zoned according to their designated uses in the Urban Redevelopment Authority (URA) Master Plan. 

Depending on the intended use of your property, you may be required to apply for planning permission from the URA to ensure compliance with zoning regulations.

10. Location

The choice of location significantly influences both the tenure and type of property you’re interested in, vice versa. 

For example, if you’re eyeing investment opportunities in areas like Woodlands or Punggol, you might mostly encounter industrial properties carrying a 60-year leasehold. Proper research on your location beforehand can effectively guide your decision-making process. 

It’s essential to ensure that the property you select not only fits your logistical needs but also holds potential for profitable rental income and resale value. This strategic approach helps in making a sound investment in the commercial real estate market.

11. Leasing and Rental Yields

Commercial properties typically come with shorter leases, such as 30-year or 60-year terms. 

While freehold commercial properties are available, they are often not situated in prime locations and tend to be on the pricier side. On average, these properties offer a rental yield of around 5%.

However, it’s important to note that owning commercial real estate usually involves higher maintenance costs, including utility bills and general upkeep. This should be factored into your overall investment strategy to ensure a balanced approach to potential returns and expenses. 


Enhancing Your Commercial Property in Singapore: Installing Solar Panels

Commercial Solar Panels

Speaking of rental yields, commercial properties such as offices tend to yield higher rental value when they are furnished. From repainting the walls to fixing any plumbing issues or leaking taps, these renovations can all help to increase rental value.

However, have you ever considered taking it a step further and furnishing your commercial property with solar panels? 

Commercial Solar Panels

Installing commercial solar panels not only supports the environment but also boosts the value of your property — especially if you’re considering reselling. Typically, adding solar panels can increase a property’s value by 3-4%.

Additionally, arrangements such as the Power Purchase Agreements (PPAs) allows businesses to enjoy the benefits of solar energy without the upfront costs of installation. 

Under a PPA, a solar provider install solar panels on your roof and you pay for the power generated, often at a lower rate than traditional energy sources. This can be an excellent option for reducing energy costs while also capitalising on clean energy.


Embracing Opportunity: Buying Commercial Property in Singapore

Diving into commercial property investment in Singapore is like opening a treasure chest of opportunities for stable returns and sustainable growth. Understanding property types, managing finances, and staying in the loop with regulations is all part of the adventure, guiding you towards your goals. 

With sustainability taking the spotlight, jazzing up your properties with cool features like solar panels not only boosts value but also adds a dash of eco-friendliness to the mix. Ready to embark on this exciting journey? Why not team up with the pros at GetSolar for a trusted and reliable approach to installing solar panels on your roof!

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