|Type of commercial property
|Shopping malls, pet shops, gyms, restaurants, bars, shophouses, HDB shophouses
|Industrial and commercial
|B1 (Offices, warehouses), B2 (factories)
While there are restrictions for foreigners when it comes to buying residential properties (generally, foreigners can only buy non-landed private homes and landed properties in Sentosa Cove), there are no such restrictions for commercial property in Singapore.
In fact, according to the Residential Property Act, foreigners can buy commercial properties in Singapore such as:
- Shophouses (for commercial use);
- Industrial and commercial properties; and
- Hotels (registered under the provisions of the Hotels Act)
In other words, foreigners have the same privileges as locals for commercial property Singapore purchases.
For locals, there are no income caps or eligibility restrictions. However, buying a commercial property is quite different from a residential property as there are several key considerations to take note of.
For example, heritage shophouses are limited and prized in Singapore as they’re conserved by the Government. They are also mostly located in the Central Areas and often have lower rents, making them popular among startups and small businesses who value the location but cannot afford the high rent costs of traditional offices.
Therefore, investing in a shophouse may make sense because they’re high in demand, and you can expect to get good rental yields. They also hold well in value, so you can also expect to get good capital gains should you sell them in the future.
However, shophouses aren’t cheap; they can be as expensive as a landed property. Depending on the type of shophouse, their usage may be restricted to their zones; some shophouses are for commercial use only, while others can be both residential and commercial.
So before deciding which commercial property to buy in Singapore, choose one that has the potential to generate good rental income or capital appreciation.
For example, if you plan to convert a retail shop into a commercial school, you need to adhere to URA’s guidelines or seek approval from them. Each commercial property has its own guidelines and regulations, which you may refer to here.
Location plays an important role because it affects the type of property that you’re interested in and its tenure.
For example, if you’re interested in buying an industrial property in Woodlands or Punggol, you may only be limited to those with 60 years lease.
Additionally, while investing in a commercial property near MRT stations and densely populated residential areas may have a good track record, the location is also highly dependent on the developments in the area.For example, if there’s an en bloc sale or if the government decides to redevelop the land, it could potentially affect human traffic and therefore also your business.
|SSD rate (on the actual price
|1 to 2 years
|2 to 3 years
|More than 3 years
|No SSD payable
When taking a bank loan, you can borrow up to 80% of your property’s value, which is higher than the Loan-to-Value (LTV) limit for residential properties (up to 75%). But since you can’t use funds from your CPF account, you need to have a higher initial cash outlay.
Also, depending on whether you’re buying for investment or for your own use, the LTV may be lower and stricter if you’re buying for investment because banks consider commercial properties to have higher risks.
Like residential property loans, there are also fixed-rate and floating-rate loans. However, interest rates for commercial properties are higher, even though the loan tenure for commercial loans is also shorter (capped at 30 years), compared to home loans (up to 35 years).
Residential properties usually have a lease of either 99 years, 999 years, or freehold.
In contrast, commercial properties usually have shorter leases and it’s not uncommon to see properties with 30 years or 60 years leases. Though freehold commercial properties do exist, they’re rarely located in prime areas and usually command a premium.
On average, commercial properties have a rental yield of around 5%. This is higher compared to residential properties, which typically see a rental yield of around 2% to 3%.However, remember that commercial properties also have higher maintenance costs, such as utility bills and general maintenance.
When buying a commercial property, the cash outlay required is dependent on the property type. For example, small offices and independent shops are cheaper, but bigger properties such as factories require more funds.
Apart from that, prices are also influenced by economic conditions. For example, tenants and rental demand will increase if the sector is doing well and the opposite is also true during a recession, which would drive down the rental yield.
Speaking of furniture, commercial properties such as offices tend to yield higher rental value when they are furnished. This would, however, necessitate the expenditure of additional funds for the purchase of furniture such as tables and chairs.
Plus, you can’t escape GST charges by getting cheap furniture from overseas sites such as Taobao or AliExpress. All imported goods valued at $400 or below will be subject to the 8% GST charge.