Singapore properties less appealing to foreign buyers for now.
The CCR sees a greater number of foreigners as high-networth individuals, families and other wealthy individuals in the region. They have long regarded Singapore as being a safe place to invest for capital preservation and appreciation.
Singapore’s pro-business government policies, which encourage foreign investment in infrastructure development, regulate business, and promote a stable society, are one of the reasons why foreigners see Singapore as a wealth hub where they can invest their money into residential property.
Even with this background, the CCR’s foreign buyer numbers have been below 200 each quarter since pre-pandemic 2018. The highest Q1 number in 2023 was 162.
The ultra-rich have always been a minority within any demographic. Under 200 foreign purchasers per quarter were not seen as a concern before and after the pandemic. The alarm bells that suddenly rang post-pandemic were a bit surprising, as there had been no signs of a change.
Cut
From Q1 of 2018 to Q4 of 2023, foreigners have transacted a large number non-landed residential home deals.
Prior to the pandemic foreigners bought 1,216 homes in 2018 and 1,000 units in 2019. These purchases accounted for 6,3% and 6% of all nonlanded private home purchase islandwide, respectively. The average number of foreign home purchases was 277 nonlanded residences a quarter (or 1,109+ units per year) before the Covid-19 virus outbreak.
Even though foreign buyers were in excess of 300 on a few occasions (between first quarter and third quarter of 2018, Q3 2019, etc.) the government was under no obligation to take action to stop this demand.
This quarterly average remained steady at 231 unit, even when the pandemic was in full swing between Q1 2019 and Q4 2021. Foreigners’ transactions were mostly restricted by travel restrictions.
No time in the three-and a-half-year period between Q4 of 2019 and Q1 of 2023 (including the pandemic) did the number sales to foreigners ever exceed 300 per quarterly, representing 3.1 to 6.9 % of all nonlanded transactions.
The foreigners represented an average of 4.7% of all non-landed transaction quarterly, since the outbreak of pandemic up to the time of the imposition of 60 percent ABSD on foreign buyers.
In the Core Central Region where prime non-landed luxury homes are located the proportion of international buyers to the total volume of sales is usually higher. From Q4 2019, to Q1 20,23, it averages at 11,7% quarterly, ranging between 7,8% and 17,7%.
Headlines, not statistics
News of foreign buyers buying multiple properties and achieving new benchmark prices has been making headlines.
But these are only anecdotal examples, and they do not show the actual influence of foreign buyers on the private market.
According to the CCR index of non-landed prices, the price fell by 0.4% for 2020. It then rose by 3.8% in 2021, 4.8% in 2022, and 1.9% for 2023.
In the past, these movements have lagged behind the overall price indices as well the indices of Outside Central Region (OCR), Rest of Central Region (RCR), and Rest of Central Region. Prices in Singapore increased primarily due to homebuyer demand.
As a result of the higher ABSD, the foreign buyer participation rate in the CCR dropped from 50 foreign buyers per month on average between January and may 2023, down to 13 foreign buyers per month on average between December 2023 and June 2023. In the months that followed May, the largest number of foreign buyers came from countries who have FTAs with Singapore. They pay the identical ABSD rates to Singaporeans.
Buyers from FTA Countries continue to express interest (although on a subdued basis) in CCR’s private housing market instead of looking elsewhere for wealth.
Singapore has a reputation for being a centre of investment and wealth. This reputation was enhanced further after the government kept its economy afloat as well as the safety of its citizens during the worst part of the pandemic.
In Knight Frank’s Report of Wealth 2022, the attitudes study revealed that 25 per cent (of the Asia-based regionally mobilized) chose Singapore to be the country in which they would most consider buying a house outside their own country. In the report for 2023, this percentage remained at 26%. The Monetary Authority of Singapore reported that the number of Singaporean families offices grew significantly from 50 to 1,100 between 2018 and 2022.
A higher ABSD rate could cause foreign investors, who are attracted to Singapore’s wealth proposition, to seek out other options in the region.
Should the ABSD rates for foreign buyers be reduced as the transaction volume in the CCR has been decreasing and foreign buyers’ activity is at a virtual standstill on the CCR? This is especially true now that the domestic demand from the pandemic has been met by the supply.
The concession could include some type of limitation.
If you want to give a lower ABSD, then only offer it for CCR homes and tickets that are more than S$5,000,000. These are the ticket sizes most exclusive for wealthy families.
The ABSD rate applicable to foreign buyers is not required to return at the previous 30 per cent level before April 2023.
Even with certain conditions, a reduction in the amount of tax could be an olive branch to show that Singapore welcomes wealth and investment from everywhere and is open to those with the skills and resources needed to grow.
Prior to this, the small number foreigners purchasing residential assets in Australia did not seem threatening. What changed since then?
The foreign buyer’s demand for residential property has been largely slashed by the doubled rate of Additional Buyers Stamp duty (ABSD), which will be implemented from April 20, 2023. Did foreign buyers flood the private residential area with such force as to unbalance the market, and marginalise the housing needs of Singaporeans?
When the government increased ABSD rate in April of 2023, they said it was a precautionary measure. The volume of foreign buyers over the past few years may show that this group has been a major influencer.
