Foreign High Net Worth Investors Are Pushing Singapore’s Luxury Homes Market
Singapore’s real estate market has been in high gear for the past few years, during which massive developments have taken place. This has also translated to rising real estate prices in a market that is considered to be maturing and highly attractive. This is a winning combination that is attracting foreign investors into the country’s real estate market, especially high-net-worth (HNW) investors.
Why the rich are flocking in Singapore for property
One of the key drivers that explains why the ultra-rich people in the society are eyeing Singapore’s real estate market is actually an external factor. It has to do with Singapore’s strategic position relative to major global trends and activities that were observed in the past few months. For example, there were geopolitical tensions between China and the U.S, while political temperatures in the UK remained high due to the Brexit issue. Consequently, investors started looking for alternative places to invest where their investments will not be affected by geopolitical and economic issues.
It also helps that Singapore has a solid financial framework; it is built on sound economic fundamentals; the education system delivers high-quality education, thus making it an ideal place for families. It is easy to conduct business, and racial discrimination is practically nonexistent. It is also quite a safe country. These factors make the city state quite an attractive investment location for HNW investors.
Some of the HNW individuals that have invested in Singapore’s real estate market
One of the notable HNWs that have enjoyed a taste of the city state’s thriving real estate is Chinese billionaire Jack Ma who founded the online retail giant Alibaba. Ma purchased a 30,000-sqft piece of land on which he reportedly plans to build a two-story bungalow with a pool. Another foreign investor that has also purchased property in the country is British tycoon, James Dyson, who acquired the Wallich Residence super penthouse for $73.8 million. The penthouse occupies two floors at the Guoco Tower, and it measures roughly 21,108-sqft.
Dyson also purchased a Good Class Bungalow (GCB) on a hilltop on Cluny Road. He reportedly paid $41 million for the GCB. Facebook co-founder Eduardo Saverin who gained Singapore citizenship in 2012 purchased, is also believed to have purchased a 10,269- sqft penthouse for $58 million in 2017. The penthouse is located at Sculptura Ardmore. There has also been speculation that he owns the 84,543-sqft GCB located at Nassim Road. The GCB was purchased for a whopping $230 million from its previous owners, Cheng Wai Keung, and his wife. However, Saverin’s ownership of this property is speculation since the transaction was handled by a trustee firm called SG Casa.
Singapore’s property market is regulated
Perhaps another reason why Singapore’s property market remains attractive is that it is regulated by the government. Unregulated real estate markets tend to have overpriced real estate listings and subsequently not as attractive to HNW individuals. In Singapore, the regulation is done through the Singapore Residential Property Act, which prohibits foreigners from purchasing land properties, including bungalows.
Foreign permanent residents have to apply for special government approval if they wish to acquire GCBs. One of the requirements for the approval includes economic contributions to the city state. Once the buyer acquires a GCB, they can only use it as their place of residence. This means they cannot rent out the property or use it for speculative buying and selling.
There is, however, an exception to the Singapore Residental Property Act. It applies to the planned resort island called Sentosa Cove, where foreigners can purchase bungalows with relative ease. This exception was put in place to attract foreign investment, especially from HNW individuals.
Knight Frank recently released a wealth report indicating that roughly 17 percent of the top wealthiest people in the world want to purchase homes in Singapore. This type of data may have influenced the 9.1 percent growth in the city state’s luxury properties. The report also noted that 8 percent of its HNW individuals in Australia and 23 percent in Australia want to purchase a new home in Singapore. The report also claims that 15 percent of the HNW individuals that already have first and second homes have a high likelihood of investing in Singapore’s real estate market in 2020.
Will prices soar out of control?
Singapore’s luxury real estate prices surged by 9.1 percent in 2018, but demand has been consistent, especially given the factors making the city-state more attractive for the filthy rich. Besides, they a few millions is not really much to worry about for the billionaires that invest in these markets. The market continued to demonstrate strong performance and is ranked highly by the Prime International Residential Index (PIRI 100). The latter is an index operated by Knight Frank, and it tracks the performance of the top-performing residential markets in the world.
The surging prices of Singapore’s luxury homes segment may not necessarily be a source of concern. This is because the government implements measures that help regulate the market to keep prices reasonable. For example, the government dropped the stamp duty in 2017, which was viewed as a step aimed at promoting a spike in demand. However, the stamp duty was raised for developers and non-Singapore residents in 2018, thus cooling down the market. Knight Frank executives believe that there will not be a significant price
Singapore’s real estate segment is currently on top of its game, especially the luxury segment, as indicated by the interest of HNW individuals. Political tensions between key markets have also played a key role in making Singapore appear more attractive to super-wealthy buyers. There is a chance that the market will continue with the same trend, especially given that issues such as Brexit and the trade war are still yet to be resolved despite the ceasefire. Also, the tensions between Iran and the U.S might contribute towards pushing investors to markets such as Singapore, where there is more political and economic stability.