What kind of commercial property can I buy?
You have a number of options if you decide to buy commercial property. Different regulations apply, let’s have a look at some of the options you have when buying commercial property.
Properties that go under the definition retail property include shopping malls, gyms, shop houses, restaurants and more. These are often acquired through takeovers, hence the buyer doesn’t open the business from scratch.
Buying retail properties, such as shophouses, can truly pay off. First of all, these are not in big supply. At the same time, old shophouses are seen as a cultural heritage, not to be demolished. Many of them are located in the central areas, for example, close to the Central Business District. Rents are often lower compared to newly built units in the vicinity. Thus, buying and renovating a shophouse can be a great option for smaller companies.
Hotels and hostels
Singapore caters to a large number of tourists and people going on business trips. Naturally, this drives the demand of hotels and hostels. However, buying a hotel is a big financial undertaking and you also need to have the right permits and licenses in place. For example, you need to submit a Certificate of Registration to the Hotels Licensing Board, in order to use the premises. You’ll also need a Hotel-Keeper’s License to manage the hotel. Also, buying hotels is usually not the cheapest option on hand. Prices usually start in the millions and can range up to SGD 1 billion.
Industrial property (warehouses and factories)
Industrial properties can be everything from warehouses, factories, and R&D facilities. Worth mentioning is that industrial properties are more expensive in general and 60% of the floor area needs to be dedicated to industrial activities.
Industrial property is divided into two different categories:
B1: Used for light industry
B2: General industry
The main difference between the two is that properties that go under B2 need to have safety areas.
As you can hear by the names, properties under B1 are often used for warehousing or offices, while the latter is used for manufacturing, car repair garages, and more.
Hong Kong has been in the headlines as local investors snap up parking lots in millions of Hong Kong dollars. That said, Hong Kong’s property market is more crowded and less regulated than Singapore’s. Investing in car parks is treated as low-risk investments, but the yields aren’t significantly high either. Unfortunately, there are no strata-titled car parks in Singapore. This means that you often need to buy big complete car parks, which can cost you tens of millions of Singapore Dollars.
Buyer's Stamp duty for commercial property
Even if you don’t need to pay the Additional Buyer’s Stamp Duty (ABSD), a Buyer’s Stamp Duty (BSD) applies.
The rate decreases progressively, depending on how long you hold the property.
The rates are currently as follows:
1% of the first SGD 180,000
2% of the second SGD 180,000
3% of the remaining value
Annual property tax for commercial property
A property tax is levied at 10% of the annual value. The annual value is calculated based on the yearly estimated rental income.
If you want to check your property’s annual value of the current or previous five years, you can visit IRAS’s website.
Capital gains tax for commercial property
Capital gains tax is normally not charged for residential or commercial property.
You might be subject to capital gains tax, in case you “trade” or speculate on the property market. Each case is treated individually.