15 Feb 2017
Commercial properties could be a viable alternative to residential properties for investors who wish to invest in another asset class. However, the purchase of commercial properties is subject to a slightly different set of regulations from residential properties. Thus, before making any purchases, investors should carefully determine their objectives and each available opportunity.
Investors considering the purchase of a commercial property should be aware of the following:
- Buying of commercial properties is subject to Goods and Service Tax (GST)
Individuals buying a commercial property will be required to pay the 7% GST on the purchase price. However, an investor who owns a company and purchases a commercial property through it may apply to claim back the GST amount, subject to the guidelines set by the Inland Revenue Authority of Singapore (IRAS).
- The purchase of commercial properties does not attract Additional Buyer’s Stamp Duty (ABSD)
Any individual who purchases a second home onwards is required to pay at least a 7% ABSD on the purchase price. However, there is no such regulation for commercial properties.
- Investors can sell their commercial properties at any time
Any home owner selling their residential property within four years will be required to pay the Seller’s Stamp Duty (SSD). Depending on the holding period, the SSD payable can range from 4% to 16%. Buyers of commercial properties are not subject to this and can choose to sell off their properties and exit the market at any time.
Real estate remains a popular investment choice in land scarce Singapore and many property investors have seen capital gains over time. However, this option is not risk-free as the property market is dynamic and is affected by multiple factors that have an impact on supply, demand and therefore price. Investors have to balance their risk appetite with investment objectives when selecting the appropriate property class.
