Foreign Buyers Flocking Singapore Property Market: This Is Why
Singapore’s property market is in a phase of rapid growth despite the government imposing cooling measures that in most cases, were expected to deter foreign buyers. High net worth investors are flocking the country at a rate never seen before, consequently fuelling a property boom.
Singapore property market in numbers
The second quarter of the year has already registered the highest number of property transactions since 2007. Even with the cooling measure in place, the industry recorded 139 transactions on properties going for more than $3,000 per square feet.
Foreign investors are the catalysts behind Singapore’s property market boom, a trend that is showing no signs of slowing down. As of the end of 2018, the total number of sales to foreign buyers was up 63%.
The buying spree has continued to gather pace in 2019, attracting even the most affluent investors in the world. Britain wealthiest man, James Dyson, has already snapped a three-floor super penthouse for a record $73.8 million. Jack Ma, the brains behind e-commerce juggernaut Alibaba, is believed to have snapped a 30,000 square feet site in Victoria Park Close. Reports indicate that the billionaire is planning to build a two-story bungalow.
Facebook co-founder Eduardo Saverin is another heavy hitter to have taken a keen interest in Singapore’s property market. Immediate reports indicate that he is the foreign buyer behind a real estate firm that snapped an 84,543 square feet plot at the prestigious Nassim Road area.
Foreign buyers accounted for about 25% of total residential transactions as of Mid-August this year. This was a slight improvement from 22% as of the start of the year. Some of the biggest investors in Singapore’s property market were Chinese, Malaysian, Indian, and Indonesia buyers.
Chinese buyers from Hong Kong, China, and Taiwan, accounted for a huge chunk of the purchase up 14% as of July.
Amidst the cooling measure designed to curtail foreign buyers, it begs the question, why are foreign buyers increasingly snapping Singapore properties.
Friendly investing environment
A report by Knight Frank indicates that two in every five ultra-high net worth investors prefer Singapore properties because of the island’s relative stability. Political instability in Hong Kong in recent months appears to have forced many investors to shift focus to Singapore. The islands zero tolerance towards corruption is another factor attracting foreign buyers.
Ease of doing business, a stable currency, as well as supportive policies towards the family formation, continues to attract high net worth investors into the island, consequently fuelling demand for properties.
Singapore taxes top earners a mere 20%, compared to a high tax rate of 40% in other markets. The low tax regime continues to attract more high net worth investors looking to set base in the country. The fact that there is no capital gains tax on property sales also continues to attract buyers into the Singapore property market.
“The current global real estate market is surrounded by a lot of uncertainty arising from political and economic conflicts. Singapore has always been perceived as a safe haven, and the Singapore property market is considered by many as safe – both in terms of quality of the developments, as well as the prices and value appreciation of the properties,” said Leong Boon Hoe, chief operating officer of List Sotheby’s International Realty.
Singapore’s affordable property market
While some buyers have had to pay record amounts, properties in Singapore are still favorably priced compared to what people have to pay in nearby countries. Compared to Hong Kong and Australia, properties in Singapore are fairly priced, providing foreign buyers an opportunity to snap top-notch properties at a discount for speculation purposes.
Singapore’s luxury property market has experienced a price decline of more than 15% since peaking in 2013. The decline has provided an opportunity for foreign buyers to snap some of the best properties at a great discount.
Minimal restrictions to foreign buyers
Foreign buyers are increasingly streaming into Singapore’s property market, given the friendly regulatory framework compared to what is on offer in other countries. Australia, for instance, has more restrictions on foreign buyers, something that has forced most investors to look elsewhere. Australia has already capped property sales to foreign buyers to 50% of the units under development.
In addition, Australia has imposed tighter loan to value ratio. Penalties for vacant properties has also forced buyers to look elsewhere. The barriers have only gone to fuel demand for Singapore properties that appear relatively priced with minimal restrictions.
Market recovery confidence
Property prices in Singapore have mostly been weighed down by the cooling measures imposed by the government. The fact that most property prices in the country are weighed down by government policies means most of them are not properly priced, taking into consideration underlying fundamentals. For that reason, most foreign buyers are flocking into Singapore’s property market on the expectations that prices will rise in the future.
Uncertainties on the global market is another development that is attracting investors into the Singapore property market. Trade tension between economic powerhouses is forcing investors to resort to safe havens outside the stock markets. Properties always appeal to investors looking for in-volatile long-term investments of which Singapore properties fit the bill.
While foreign buyers are the catalysts behind the booming property market in Singapore, locals are playing a significant role. An increase in household wealth has triggered a movement up the housing ladder with locals preferring to spend top dollars to live in affluent neighborhoods.
Over the last ten years, the number of locals earning more than $20,000 a month has more than doubled. Singaporeans are thus expected to make up more than 70% of all purchases in Singapore property market in the second half of the year.
An influx of foreign buyers into the property market is not expected to have any negative impact in the long run. For starters, most foreign buyers purchasing affluent homes have already established businesses in the country and expected to live there for many years to come. Conversely, prices in the Singapore property market can only continue to edge higher due to strong demand both locally and from foreign buyers.