How Attractive Is Singapore Property On A Global Stage?
There is every chance that property buyers, both local and foreign, will be keeping an eye on Singapore as an investment destination for homes.
Since the onset of the pandemic, Singapore has been a beacon of stability.
The nation's pandemic response earned high praise from the World Health Organisation and the International Monetary Fund due to its robust economic policy framework that enabled the authorities to mount a coordinated and comprehensive policy response, with fiscal policy acting as a first line of defence.
Long seen as a safe haven, Singapore's properties have remained resilient through the pandemic with the Urban Redevelopment Authority's benchmark overall private home price index rising 13 per cent over the past 2 years.
However, housing prices in other key financial hubs around the world have outshone Singapore in the past 5 years as well as for the whole of last year.
According to Knight Frank Research's comparison of Singapore with the other key gateway markets of New York, London, Tokyo, Hong Kong, Seoul and Sydney, Singapore's property prices rose by a total of 26.5 per cent during the 5-year period between 2016 and 2021, surpassing only London, where property prices grew by 10.3 per cent over the same period due to the fallout from Brexit.
Even for 2021, despite Singapore achieving the highest full-year private home price growth in 11 years, it was still behind most of the competition, outperforming only Hong Kong (2.9 per cent) and London (5.1 per cent).
One major factor for the underwhelming performance could be due the slew of cooling measures implemented by the authorities.
Singapore is probably the most regulated housing market among its global peers. Had the cooling measures been absent, the city state could have easily attracted much more capital and the appreciation in private home prices would have been more pronounced. With cooling measures firmly in place, the question is whether Singapore's housing market is still attractive.
Based on our house view, Singapore will remain one of the world's most attractive cities for businesses and investors in the post-pandemic world and this will continue to underpin housing demand over the medium to long term.
The Covid-19 pandemic has magnified geopolitical uncertainties such as the rivalry between the United States and China, disrupted global supply chains and fuelled trade protectionism among countries which are focused only on the short-term results.
The evolving pandemic has thus re-defined attitudes towards risk, particularly among the ultra-high net worth individuals. As a result, wealth flew in; so did wealthy entrepreneurs and global talent. The continued promotion of the variable capital company (VCC) has increased the profile of Singapore as a default go-to location for global funds to be set up here as the island rises as a wealth and asset management hub.
The introduction of the Tech.Pass scheme highlights the new growth strategy of luring high-potential companies in high tech domains that are seeing exponential growth. The capabilities sought will involve expertise in cutting-edge technologies including artificial intelligence, blockchain, cloud computing, data analytics, and birthing unicorns and companies at the pre-unicorn stage.
Despite its small size, Singapore is a regional manufacturing powerhouse. Manufacturing represents a sizeable component of Singapore's gross domestic product at around 20 per cent, differing from other global financial hubs which tend to be services-led.
Singapore makes 4 out of the world's top 10 drugs and is the seventh largest exporter of petrochemicals. Singapore is also a key node in the global supply chain for products ranging from storage and memory products, to microelectromechanical systems.
With this backdrop, Singapore's diversified economic base has paid off during the Covid-19 pandemic. Biomedical activity and advanced manufacturing are seen as gaining considerable traction in Singapore in 2022 and beyond.
Singapore is also unique in its offerings as a global wealth management hub and financial hub anchored in political stability, low corruption rates and transparent public institutions. Singapore will remain a perfect base for businesses and investors seeking to capture the upside of the huge growth potential in Asia in the coming decade.
As economies recover from the pandemic-led crisis, the property cooling measures in Singapore have kept private home prices from escalating out of control - compared with other gateway cities.
There is every chance that property buyers, both local and foreign, will be keeping an eye on Singapore as an investment destination for homes. As such, luxury homes in Singapore are expected to continue to receive keen interest from foreign investors despite the increased additional buyer's stamp duty (ABSD) rates.
The Republic's recent announcement of further easing of border curbs should draw some of the globally mobile wealthy who are still prepared to pay the 30 per cent ABSD for entry into Singapore's stable prime residential market.
Singaporeans themselves, if given a choice, would prefer to purchase in the local residential market than to venture overseas, according to the Attitudes Survey in Knight Frank's Wealth Report 2022.
However, the latest round of cooling measures announced on the night of Dec 15, 2021 might compel some to look at prospects overseas, with the United Kingdom, United States, Australia and France mentioned as popular destinations for Singaporeans looking beyond domestic borders in the same survey.
With the recent hike in ABSD rates, overseas markets with lower barriers to entry may appeal to property investors looking to diversify their portfolios and in search of higher returns - both from recurring income as well as capital appreciation.
Gateway cities in the UK, Australia and US have always been popular among Singaporean property buyers, as these are mature, highly transparent markets with a strong rule of law and enjoy blue-chip status similar to Singapore. A common motivation for purchasing a residential property in these markets is to provide accommodation for their children pursuing higher education.
Those seeking global mobility also gravitate to these markets for the lifestyle they offer.
Nevertheless, investing overseas, whether in mature or emerging markets, inherently comes with risks and challenges. First and foremost, it is important for buyers to educate themselves on the markets they may be interested in by keeping abreast of the latest regulations, news and market insights through a variety of reputable research reports.
As well, they should obtain professional advice from a licensed property consultant, legal representative, banker and tax professional.
The power and ability to leverage is one of the reasons property is attractive, and in mature markets such as the UK, US and Australia, there generally are more financing options available from local banks, as well as from Singapore banks.
However, this is not always the case in all overseas markets, especially emerging ones. This is something potential buyers should be aware of before they decide to purchase an overseas property. It is recommended that buyers speak to a bank to obtain a loan approval or at least an in-principal nod before deciding to purchase.
Singaporeans may not be familiar with overseas developers; therefore, buyers should also look into the reputation and the track record of the developer they intend to buy a property from.
And finally, at project completion, overseas landlords are going to need assistance with leasing and property management. Buyers should appoint a professional property manager ahead of completion, providing them with the peace of mind that their investment will be well taken care of.
Christine Li is Head of Research, Asia Pacific, Knight Frank. Nicholas Keong is Head of Residential (International Project Marketing, Prime Sales & Leasing), Knight Frank Singapore.
Credit: Business Times