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13 terms you should know before buying properties

13 terms your should know before buying singapore properties

13 terms you should know before buying properties

13 Terms You Should Know Before Buying Properties

Well, the title “13 Terms you should know Before Buying Properties“, is certainly no longer valid as time goes by and I started adding more and more terms to this article.

Welcome to the exciting world of property purchase, where you could better prepare for your future home through better knowledge and experience. Like any other industry or sector, the property market does have its fair share of jargon and terms that might not be familiar to outsiders.

One of the things that might scare you when you first step into the world of real estate, however, might just be all the complicated lingos that are often thrown around. You might fear that you’ll be cheated because you don’t understand what any of these words mean.

Not to worry – here is a handy guide to help you out, listed in alphabetical order:

ABSD

Probably the most loathed 4-letter acronym by upgraders, investors, developers and real estate agents! It stands for Additional Buyers’ Stamp Duty.

Yet another dreaded 4-letter acronym is TDSR.

Bay Window

An architectural feature is typically a concrete ledge protruding before the window. The developer’s profit margin. The homeowners’ bane. See also Planter Box.

BTO

Built-to-order or referring to brand new HDB flats brought directly from HDB. Do get check your financial and grant eligibility by applying for a HFE.

Completion

This term is commonly used in resale or secondary property transactions referring to the situation whereby the transfer of the property from a seller to a buyer has taken place.

COV

Cash Over Valuation. A situation whereby the sale price of a property is higher than its valuation. As financial institutions aren’t allowed to loan more than a certain percentage (LTV) of a property’s value. The difference between the price and the valuation is then known as the COV.

This is a term more often heard in the HDB resale market. But may occur in any resale or secondary property transactions.

CSC

Otherwise known as the “Certificate of Statutory Completion”. It’s a certificate to prove that a building has been completed and that all the legal requirements have been met (safety, building design, etc).

It is issued by the Commissioner of Building Control and is usually given after the Temporary Occupation Permit (TOP) is issued.

DLP

This begins when you collect your keys during TOP. The Defects Liability Period ends when the developer has achieved CSC.

Downpayment

The initial payment you must pay when purchasing a house. It’s the remaining portion of money from the amount that your bank is willing to lend you for the purchase.

The downpayment can usually be paid partly in cash and partly using your CPF account.

En-bloc

A collective sale where owners of private properties sell to a developer for en bloc redevelopment. There is a need to have at least 80% of the strata title share before the collective sale can proceed.

Developers usually favour this avenue to acquire land when Government Land Sales are limited in supply.

Freehold

If a property is a freehold title, or you might see this term – estate in fee simple; it means that anyone who owns it, holds the ownership forever.

GLS

Government Land Sales

HFE

Requiring only a one-time submission of an online application, HFE is a new initiative by HDB to further streamline the sale and purchase process. Making DIY purchase and sale that much more painless.

HFE will combine the assessment outcome for a HDB loan and CPF Housing Grants into one single document.

HLE

This stands for HDB Loan Eligibility. HDB buyers who wish to take a mortgage loan from HDB ought to apply for this letter before commencing their search for a property.

HDB has just announced a new initiative called the HDB Flat Eligibility Letter (HFE) to further simplify the purchase and sale process.

IPA

I realise this acronym isn’t really unique to the real estate industry. But when used in the context of the property market, we generally refer to the in-principle approval from the bank.

Leasehold

This type of property, on the other hand, is one where you only own part of the right to occupy the land for a given amount of time (either 99 years or 999 years). And once that lease is up… the land revert to the government. But that’s a topic for another time.

LTV

Or Loan to Value. It is the amount of money you borrow for a property’s mortgage (otherwise known as “mortgage quantum”) divided by the total appraised value of the property.

LTV is one of the risk factors that lenders such as your bank assess when deciding whether if you qualify for a mortgage loan.

MOP

The Minimum Occupation Period is the length of time a HDB flat buyer has to stay in before you are allowed to sell it (as of this writing, it stands at 5 years).

MSR

Mortgage Servicing Ratio. This affects only buyers taking a mortgage loan on a HDB. This applies to both bank loans and HDB loans. The mortgagee is only able to use up to 30% of their income to service the loan.

OTP

Option to Purchase is the right, but not the obligation, given by the seller of a property to the purchaser within a specific period of time. As a purchase, you must purchase the property within this period in order for the transaction to be valid.

Planter Box

Yet another one of those architectural features that not many homeowners appreciate (see Bay Window).

Plot Ratio

Very straightforward – it is the total area on all floors of all buildings on a certain plot divided by the area of the plot. In other words, it tells you the density of property development on that piece of land.

PPVC

You will start to hear more of this from agents trying to sell you units in new launches. This is because starting from November of 2014, sites sold through GLS will require the developer to construct using the Prefabricated Prefinished Volumetric Construction method.

If you can’t sleep or is genuinely interested in learning more about this, head on to BCA’s website to read more!

HDB BTO

One major downside to this method of construction is the inability to hack down walls. In addition, dimensions are constrained, thus you will find room widths and ceiling heights to be narrower and lower than conventional construction. New launches using this construction method also tend to look very similar to each other, for obvious reasons.

But the upsides of using PPVC are faster construction and better quality control.

$psf

A very common term you will usually find when house-hunting on real estate websites. It means “Per Square Foot”, and it’s a unit of measurement for an area. $/psf is the total price of the property divided by the land area (in square feet).

This is a popular way for consumers and investors alike to determine whether a property is cheap or expensive. As we normalize the price to one square foot, we then can compare two properties of different sizes.

However, there is a flaw in using this in exclusion of other considerations like location, age, land tenure etc. In fact, there is a disconnect between brand new launches and resale properties which I have written about here.

SIBOR

The Singapore Interbank Offered Rate (SIBOR) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market (or interbank market).

It is similar to the internationally used LIBOR (London Interbank Offered Rate).

How will this affect you? Well, if banks have to increase the interest rates in the market for other banks, that means they will increase the interest rates for your home loans too. Everyone’s gotta make a living based on how the economy is like, after all.

Sinking Fund

A sinking fund could be set up as part of the monthly service fee (or more commonly referred to as the condo maintenance fee) to cater to one-off or large expenditures. These are typically related to the replacement of wasting assets like lifts, pumps, or the renovation of facilities like pools, playgrounds etc.

This is different from the maintenance fund which is used to provide for the daily upkeep of the condo.

SSD

Seller’s Stamp Duty. This was part of the cooling measures to curb speculation in properties first introduced in February of 2010. It is a tax levied on the sales price for residential properties sold before the stipulated time.

As of the latest cooling measure introduced in March 2017, properties brought after this date would need to be held for more than 3 years before the SSD expires. Otherwise, properties sold within the first, second and third year of ownership will attract a 12%, 8% and 4% Seller’s Stamp Duty respectively.

Stack

As opposed to a block, a stack is the unit number. We like to refer to stacks rather than block because, in one block, there are typically a few stacks. And different stacks have different layouts and facings.

Strata title

A form of ownership that you and a group of people have over apartment blocks or condominiums. Yes, that means the ownership is shared among all of you. It is distinct from the form of ownership a landed property owner will have (over the entire land).

TDSR

Total Debt Servicing Ratio. Borrowers are only able to take on debt up to 60% of their income.

TOP

Basically, it’s a permit given by the Commissioner of Building Control that grants permission for owners and tenants to occupy a building only after certain requirements are met.

It stands for Temporary Occupation Permit. This will signal the start of the defects liability period (DLP) and will precede the granting of the certificate of statutory completion (CSC).

And that about covers it! More often than not, property advisors like myself will help you through the complicated process of homeownership, but if you are ever feeling anxious over your lack of knowledge over these terms… well, there you go. All prepped and ready to plan on your own.

Should you require further assistance on these terms, please feel free to contact your trusted advisor and I would be more than happy to elaborate further.

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