This article examines how Singapore has performed as a preferred destination for property investors. It examines some key findings from corporate reports and translates them into what they mean for the luxury segment.
Leading Country for Real Estate Investing
In real-life property, selecting the ideal spot has been the one goal. Based on the PWC – Urban Land Institute’s 2021 study on the developing tendencies in Asia-Pacific Property, Singapore is the top selection for high-net-worth investors’ consideration. Singapore is rated #1 as an investment chance and has the greatest city improvement probabilities. Singapore additionally ranks second on the probability of rental progress.
These are why Singapore has become one of Asia’s most attractive cities for foreign direct investments (FDI).
Overall, Singapore has been ranked consistently high in the global real estate investor survey for the past four years. This consistent performance indicates that Singapore is well-placed to have a resilient housing sector, given its geopolitical stability and sound governance.
Singapore is one of the world’s safest places to invest. Singapore is also one of Asia’s leading financial centers. Singaporeans can take full advantage of these two factors to earn high returns. Singapore offers a great combination of safety and stability. At the same time, Singapore is a major regional hub and gateway to the rest of Southeast Asia. Therefore, Singapore is one of the best choices for Asian investors seeking to diversify into international markets.
Singapore is a top three choice, according to the 2020 CMB–B&W survey is expected to set Singapore up to reap significant benefits from increased investments by Chinese high-net-worth individuals and sovereign wealth funds. Chinese high-net-worth individuals have doubled their foreign real estate holdings from 15 percent to 30 percent, and they expect to continue increasing their investments in real estate. Sovereign wealth funds have a total estimated $10.5 trillion in assets under management (Statista, 2020). We see a positive outlook for their investments in real estate, especially given the strong performance of the market over the last year.
As we’ve seen so far, Singapore has been able to withstand the global economic headwinds caused by increasing interest rates, oil prices, and geopolitical uncertainty. It remains an attractive investment destination for foreign investors looking to invest in Asia.
Singapore’s property market outlook
The bullish case is backed by Morgan Stanley, along with views of many property analyses. Morgan Stanley sees Singapore property doubling in price between 2018 and 2030. A strong economy, rising population, and increasing foreign labor force means strong fundamentals for growth over the next 10 years. Demand will remain stable, thanks to government efforts to cool the market. With limited land availability, prices won’t get out of control.
With the current economic conditions, we believe there is still room for appreciation in the commercial realty sector. However, we anticipate some modest declines in rents due to the COVID-19 situation. We believe that the overall CAGR for the commercial realty sector remains strong despite these challenges.
Luxury markets in Singapore as one of the best segments to invest in, especially those located in districts 9, 10, 11. This market segment is defined as high-end condos, landed property, and GCB’s typically priced between $3,000-$6,000 psf. These units can be bought either freehold or leasehold, with prices ranging from $5-$20 million. Units are generally located in areas such as (District 9:)Orchard Road, River Valley, and Cairnhill; (District 10:)Tanglin Road, Farrer, and Holland; (District 11:)Thomson, Watten Estate, Novena and New Town.
Prices for private condos and houses in Districts 9, 10, and 11 have been growing steadily since the end of 2019. Since then, they’ve increased by an average of 5.5 percent per year. But during the first quarter of 2020, prices grew by almost 20 percent compared to the previous period.
Singapore’s aggregate property prices are expected to grow by an average annual rate of 21 percent between 2016 and 2018. However, we expect the luxury segment to outperform the overall property sector due to stronger economic drivers such as foreign direct investment (FDI) inflows and the increasing number of high-net-worth individuals (HNWhs).
We now break down the breakdowns of foreign investments into the land and apartment-condominium sectors. We see that foreign interests in land (1%) are much smaller than those in apartments & condos (21%). One reason could be the stringent requirements of the Land Development Authority of Singapore (LDA) for foreign buyers to acquire lands before they can do so. Another reason could be that the vast majority of land sales in Singapore are made between private individuals rather than companies. Yet another reason could be that the population density in Singapore is low compared to other countries. In addition, we see that foreign interests in the land sector are more diverse (49%) than those in the apartment-condominium sector (24%). A notable demographic we would like to highlight is the presence of Chinese buyers in the land sector (29%) as opposed to the apartment-condominium segment (35%). This may be because the strict LDAU guidelines require foreign buyers to apply for permission from the Ministry of National Development (MND) prior to purchasing any land.
Currently, the land sector is experiencing more foreign investment, with Chinese companies leading the way. However, this depends on whether the government policy becomes more adverse toward foreign capital.
The probable effects of the latest 16 December 2021 ABSD changes for expatriates and developers in the luxurious sector. ABSD for expatriates purchasing residential houses increased by 10 percent (from 20 percent to 30 percent). Developers are likewise struck by a ten percent rise in ABSD (from twenty-five percent to thirty-five percent). This may cost out some traders seeking to invest in Singapore, triggering a selection effect on wealthy overseas people. In consequence, this may push out overseas buyers of luxurious homes in Singapore. Overseas purchasers who’re excluded from the residential home industry can move to commercial houses as an ABSD-cost-free choice.
It could be because foreigners don’t know about the LDAU approval requirement for buying landed properties. However, the current foreign landowner share is quite small and can potentially increase in the future if the government allows more foreigners to own land.
Summary
Singapore is one of the best countries in Asia to invest in property. Its strong economic growth means that investors can expect high returns on their investments. The government has also taken steps to encourage foreign money into the country, meaning that the demand for the property should continue to rise. In addition, the city state’s policies mean that it attracts wealthy individuals who would otherwise spend their money elsewhere.
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