Singaporean demand for overseas properties continues to wane

SINGAPOREANS' appetite for overseas properties continues to dwindle this year after a soft patch last year, prompting overseas developers to cut down on marketing exhibitions here, agents say.

Their overseas property purchases have invariably been curbed by lower borrowing capacities under the total debt servicing ratio (TDSR) since June 2013.

Doris Tan, JLL head of international residential properties, noted that while the imposition of the additional buyers' stamp duty prompted some property investors to look outside of Singapore, that initial rise had receded since TDSR practically "killed the whole market". Even in the popular London market, investors are taking a wait-and-see approach pending the UK general elections in May, she observed.

Once a hot overseas market for Singapore property investors, Malaysia is also losing its lustre given the negative spin from concerns of oversupply in Iskandar, said Getty Goh, director of property research and consultancy firm Ascendant Assets, which partners agencies on research work to pitch to potential buyers. He noted that Singaporeans are also keeping away from Iskandar due to a lack of a resale and rental market now. Both London and Malaysia have imposed their own "cooling measures" to rein in prices, he added.

"A combination of reasons has caused overseas markets to become less attractive."

The only official statistics available for Singaporeans' overseas property purchases comes from the Monetary Authority of Singapore (MAS) survey of real estate agencies in Singapore, which was last published in its Financial Stability Review in November.

The MAS survey showed that the total value of overseas properties snapped up by Singaporeans hit a peak of S$1.67 billion in the first half of 2013.

This coincided with the tightening of ABSD in January 2013 as rates were raised by 5-7 percentage points and the ABSD started to be imposed on Singaporeans buying their second homes and permanent residents, foreigners and non-individuals making first-time purchases. But Singaporeans' purchase of overseas properties soon dropped to S$1.35 billion in the second half of 2013 after the TDSR was imposed, and slipped further to S$1.07 billion in the first half of 2014. Data for the second half of 2014 is not available.

Properties in Britain, Malaysia and Australia accounted for 91 per cent of total transactions by value in the first six months of 2014 and 76 per cent by number.

Century21 Singapore CEO Ku Swee Yong noted that investors "started getting cold feet" when prices in Malaysia shot up too quickly and sales to overseas buyers in the UK have slowed. Meanwhile, the pick-up in new markets such as Japan, Philippines and Cambodia was not able to make up for the slack in the traditional markets.

Since early last year, Malaysia doubled the price threshold for foreign home buyers to RM1 million (S$370,000) and raised real property gains tax to 30 per cent for properties sold by foreigners within five years of purchase and 5 per cent thereafter - with the exemption of Iskandar Medini, a township within the Nusajaya flagship zone.

In the UK, capital gains tax of 18 per cent or 28 per cent on non-residents disposing of UK residential property started from April 6; Australia also proposed in February that a fee of A$5,000 (S$5,200) to be charged on foreign property purchases under A$1 million, and A$10,000 for every additional A$1 million.

Colliers International operations director Nina Davies pointed out that there was a noticeable drop in the overall number of overseas developers and agents marketing properties in Singapore.

"It is apparent that there are fewer developments being marketed at this point in time, although we have not experienced this decline ourselves. Demand for well-located property in London continues to be strong."

Mr Goh noted that post-TDSR, buyers with S$100,000 to S$200,000 of cash but are unable to get optimal loans as it is their second or third housing loan would have considered going for Bangkok or Iskandar because of the lower purchase quantums and accessibility of loans in the host countries. But many with the interest for overseas properties would already have sunk in their monies.

"With Singapore prices levelling off, some are waiting on the sidelines and reserving their cash for the opportune time to enter Singapore market," he added. "They also think overseas markets may not present as much opportunities as several quarters or a year ago. They are starting to look around in the local market."

Singaporeans' wariness towards overseas properties was again fanned by news of investments gone wrong in cases such as Ecohouse, Mr Goh said, referring to the Brazilian social-housing developer that dangled annual yields of 20 per cent, amassed up to S$65.55 million from Singapore investors and then left them largely unpaid.

Savills head of international residential sales Cherrin Loo noted that some developers are more cautious about how they spend their money in the face of cooling interest from Singaporean buyers and are holding back from full-fledged exhibitions. But property exhibitions are still going on for selected markets such as the UK, Japan and Malaysia.

This weekend, for instance, Kuala Lumpur-based developer Pavilion Group is unveiling Pavilion Suites Kuala Lumpur - a collection of 383 luxurious units ranging from 704 square feet to 1,254 sq ft - at the Four Seasons Hotel at an average of RM3,500 per square foot (psf).

Knight Frank is marketing Grand Central, a project by Weston Homes in Cambridge, UK comprising apartments and townhouses, also at the Four Seasons Hotel this weekend; at Shangri-La Hotel, Colliers is marketing Quintain's London project Alto, located at Wembley Park.

JLL Singapore's promotion for Manhattan Plaza, a London project of Telford Homes, is on appointment basis next Tuesday to Thursday at its Singapore office in Republic Plaza. Some 120 units, starting from £450,000 (S$906,000) for a one-bedroom apartment, are being launched globally.

Overseas developers are still seeing strong buyers' interest from other places such as Hong Kong, Shanghai and United Arab Emirates, Ms Tan of JLL said.