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From condo flippers to homebuyers: Are buying patterns shifting for foreigners in Singapore's real estate?
FOREIGN buying has always been a major force driving real estate markets across the world, and Singapore is no exception. But increasingly, many in the property sector are observing that more foreign buyers now see their Singapore residential property as a home rather than just a quick flip.
Anecdotal evidence points to a structural change in how foreigners regard their residential home ownership here, with more buying to stay rather than as an investment with quick returns.
The shift in perspective is not entirely due to a change of heart. “You must understand that the nature of buying property has changed – few can fit into investment objectives of exiting (profitably) in 3-6 years,” says Kevin Feng, PropNex group district director.
Mr Feng cites the 20 per cent additional buyer's stamp duty (ABSD) on Singapore property purchases as the biggest obstacle to a quick flip.
Market cooling measures introduced in July 2018 jacked up the ABSD to 20 per cent and 25 per cent for foreigners and entities respectively. There is also seller's stamp duty imposed on a sale if the home is held for less than three years. The July 2018 rules were the ninth - and latest - round of cooling measures starting from 2009.
In line with the market measures, interest in Singapore residential homes from foreigners has come down over the years, data from the Urban Redevelopment Authority shows.
The all-time high in foreign buying was in 2011, with the 9,748 private apartments and condos sold to foreigners translating to a 33.8 per cent share across the island.
In 2019, there were 16,753 transactions in non-landed home sales, of which Singaporeans accounted for 13,097 units or 78.2 per cent. Permanent residents (PR) and foreigners account for 3,656 units (21.8 per cent), says Lam Chern Woon, Edmund Tie senior director, research and consulting.
In prime districts, non-Singapore citizens accounted for a higher share - 30.1 per cent - of non-landed home sales in 2019.
Latest available data shows that in the first three quarters of 2020, the share of non-landed home sales transacted by non-Singapore citizens fell slightly to 20.4 per cent of 12,049 units islandwide, and 28 per cent in prime districts, which is not surprising given the travel restrictions in place due to to the Covid-19 pandemic, says Mr Lam.
From here on however, analysts note that it will be more difficult to analyse foreign buying behaviour. The URA in October stripped out certain pricing data on foreign buying on its Realis data platform, and industry watchers will not be able to capture the buying behaviour of specific nationalities for a given locality or time frame. The removal of certain data sets was done during a review of Realis, and was due to their very low usage rates, the URA said.
Given the current 20 per cent headline ABSD rate imposed on foreigner individual purchasers (and 25 per cent on entities), such purchasers have remained cool to the Singapore residential property market, says Kenneth Szeto, Withers KhattarWong partner.
"However, we do currently see an increase in private wealth investment activity on the high-end residential property market, involving US citizen buyers who are accorded the same stamp duty treatment as Singapore citizens or new Singapore citizen buyers, under the US-Singapore Free Trade Agreement," said Mr Szeto.
Sometimes, when the wealthy buy, they snap up multiple units in one swoop.
"Private wealth purchasers have the flexibility to structure their asset acquisitions via trust structures or by direct ownership, and multiple units can be acquired at a time for various family members," says Mr Szeto.
"Such investors would probably not plan to exit their investments before three years, as seller's stamp duty would be payable on the sale price," he adds.
The who, why and where
One Briton who began buying property in Singapore back in the early 1990s can attest to the attractiveness of being an investor here. The Londoner, who was working in the financial industry, went big on trading Singapore properties from 2003. The UK residential market then was no longer attractive to investors as prices had hit highs, and the Singapore market, unburdened by a capital gains tax, began to appeal. In some condos, she would pick up two units at a time, and she also reaped several enblocs along the way.
Visiting Singapore regularly because she had family here, she felt the environment changing towards the late 2000s to tamp down froth, and banks were beginning to tighten lending criteria. Her last condo purchase was in 2008.
"At one point I remembered I didn't have to come out with anything for the downpayment, the bank was willing to lend 100 per cent," said the Briton who has since retired from her investment banking job.
The level of speculative activity in private homes has come down over the years. Even for Singaporeans, there is a shift in mentality that one has to hold for the medium to long term in order to make money, says Lee Sze Teck, Huttons Asia director, research.
While mainland Chinese buyers dominate the international contingent - and have done so for some years now, many of the Chinese buyers are already living in Singapore. Some are expatriates working for the rapidly growing number of Chinese companies which have set up operations here, says Mr Lee.
"It's part of the Asian culture of buying properties, compared to Westerners for whom renting is more common," he says.
Mr Feng, who sells 30-40 houses a year to mainly buyers from China, says that "all buy for home stay" now, given the government's policy to remove speculation from the market.
He leads a team of about 50 agents, with half of them targeting the China market.
Since 2011, China buyers have overtaken the Indonesians as the largest group of foreigners buying homes here except in 2012 and 2015.
So far, this year for non-landed sales islandwide, the top foreign nationalities are from China, Malaysia, India, Indonesia and the US in this order, said Mr Lam. These buyers make the bulk of their purchases in the S$2 million or less price bracket, he said.
"There is a noticeable preference of Indonesians for pricier homes; 15 per cent of Indonesian purchases were for homes priced above S$5 million, compared to the proportions for the mainland Chinese (8 per cent) and Americans (9 per cent)."
Looking at 2020 non-landed sales in the traditional prime districts of 9, 10, 11, the top foreign nationalities are from China and Indonesia and the US, he said.
"Again, there is an interesting contrast of where the purchases are concentrated. The Chinese and Indonesians make the bulk of their purchases in the S$1.5 million to S$3 million bracket and also the over S$5 million bracket. On the other hand, the Americans tend to make purchases in the S$2 million to S$4 million range," he said.
Homes priced above S$5 million accounted for 39 per cent of purchases by Indonesians; 32 per cent of purchases by Chinese, and 14 per cent of purchases by Americans.
"Anecdotally, we hear of Indonesians and Chinese snapping up homes in the prime districts for various reasons; the former buyers favouring prime homes for their proximity to the medical facilities like Gleneagles Hospital, Mt Elizabeth Hospital, while the latter buyers are seeing property investments in the Republic as a store of value, hedge against currency devaluation risks and also as homes for their children," says Mr Lam.
Another area in favour is pricey Sentosa Cove, where landed homes cost over S$5 million, and where there are no restrictions on foreigners buying landed property.
Of the 25 non-landed homes sold in Sentosa Cove so far this year, 12 were bought by foreigners, says Christine Sun, OrangeTee & Tie, head of research & consultancy. Of the landed houses, foreign buyers outnumber locals three to one. Foreign buyers made up six of the nine transactions.
The jet-set market
For the very wealthy, Singapore is but one of several homes for their jet-set lifestyles, and counts as a safe investment environment.
Some projects in particular have a high proportion of international buyers.
About 70 per cent of buyers in The Wallich Residence are foreigners including permanent residents, said Dora Chng, GuocoLand general manager (residential).
One Wallich Residence buyer from Hong Kong says that when he looks at real estate across the world's major cities, the main factors are "location and the developer's branding, as these will affect the property's quality and resale values in the future".
"In terms of location, I have owned a few properties in Singapore's Central Business District (CBD) as well as in the prime District 10 luxury residential area," he says.
"Both have their own advantages. For the CBD area where there is a huge tenant pool, my top choice will be for smaller apartments which have good connectivity like being directly connected to the MRT, as these are what the tenants require so that there will be good rental yield. For other luxury residential areas, my focus will be on the facilities, the greenery and the landscaping of the development."
Another GuocoLand development, Martin Modern, has about 60 per cent foreign buyers, says Ms Chng. "Our developments are multinationals," she says.
While the Chinese form a sizeable contingent for Guocoland's projects, other foreigners who have bought Guocoland developments include Emiratis, Brazilians, Germans, Koreans, Lithuanians and Taiwanese. There are also buyers from Cyprus and Belgium.
"Singapore is in a great location internationally, with a clean and promising government, as well as a great civic society," says a buyer from Taiwan.
"We bought it mainly for investment, as it is also not easy to get Singapore PR or citizenship under current immigration regulations," said the buyer who is a managing director of an international trading company.
"Later, we may use it when we travel to Singapore for long stays," added the buyer is married with three children.
In a safe space
A recurring theme for foreign buyers is that Singapore is a safe place for families. The nation is also gaining visibility as a politically stable spot in a region now marked by uncertainty and upheaval.
A researcher who grew up in Shanghai and worked in Europe before being transferred by his company here in 2016 decided to take the plunge as he wanted to bring up his family in Singapore. This year he bought a 1,400 sq ft 3-bedroom condo in Holland Village area, priced close to S$3 million. The main argument was the family friendliness of the city/country, given the realistic options we had," he said of the decision for Singapore.
"Our obvious alternative was Hong Kong, where recent disturbing developments proved our pick of Singapore as a fortuitous one - it was not obvious that Singapore would strictly dominate Hong Kong, if we were to take into account our career upsides," he says.
He opted to buy in Holland Village: "We've been living in HV for two years and like the amenities like shops, hawkers, and convenient transportation."
After looking extensively, he ended up buying the apartment he was staying in, from his then-landlord. The owner was willing to sell and the deal was quite smoothly done, he says.
Withers KhattarWong's Mr Szeto says: "We do see a recent pick up of high net-worth individuals and families moving to Singapore and relocating their family offices here as a safe haven jurisdiction amidst the uncertainty across the world."
He adds: "With whole families relocating here, it is not surprising if such clients take advantage of opportunities, whether as new citizens or citizens of FTA countries to make multiple property investments in a relatively safe and stable environment."
That stability has now given the Singapore market a convincing edge over other Asian locations.
Another buyer from Hong Kong who snapped up a luxury condo just after the circuit breaker ended, paid over S$8 million - with some parental help - for a 3-bedroom property in a boutique project in the Stevens Road area.
"The decision for my parents to buy was because I had gotten PR and this was a currency hedge. This will enable me to have a home here, or a place for my parents to settle should things get bad in Hong Kong," she says.
The buyer, who is married with a child, came to Singapore as her husband works for an international bank here.
"We were looking for something premium in terms of finish, at least 2,500 sq ft, new built, in district 9 and 10 with a condo that had small number of units," she says.
"We are realistic that Singapore property doesn't rise that much but obviously we tried to maximise capital appreciation by buying at a discount and leverage as we intend to apply for a mortgage," she says.