Singapore Property Market – Time To Invest?
Singapore has always been on the radar of many investors both locally in Singapore and internationally. In 2007, private residential property transactions hit 38,531. In 2008 however, this number dwindled to 13,844 (Source: Number of caveats lodged with the Singapore Government). For the first five months of 2009, more than 7,000 caveats were lodged indicating a faster pace of transaction compared to 2008. Published data indicates that Singapore is currently experiencing an upswing in the real estate market.
Caveats of all private residential properties (primary and secondary market)
2007 – 38,531
2008 – 13,844
YTD 2009 (Jan – May) – 7,073
Caveats of all private residential properties (primary market)
2007– 11,572
2008 – 3,972
YTD 2009 – 2,986
Caveats of all private residential properties (secondary market)
2007 – 26,959
2008 – 9,872
YTD 2009 – 4,087
Source: URA Realis
Figure 1: Caveats lodged in 2007, 2008 and YTD 2009 (Source URA Realis)
There has been strong buying activity over Q1 and Q2 2009. The first two projects that really started it off were Alexis (Alexandra Road), and Caspian in the Jurong Lake area, which were launches in the early part of this year when the mood was at its lowest. It was primarily developments outside the central core region of Singapore that did well.
Based on the data from Urban Redevelopment Authority (URA) Singapore, since February 2009, New Sales (Developer Sales) have exceeded 1,200 units per month sales with May at 1,668 units, 37 percent more than 1,214 in April 2009. New Sales in May 2009 is just shy of three percent of the last high of 1,723 units in August 2007. Refer Figure 2 for the New Sales Transaction from November 2008 to May 2009.
Figure 2: New Sales Market Transaction – November 2008 – May 2009
It is interesting to note that based on URA’s data on the Buyer’s Nationality of New Sales from January to May 2009, Malaysians rank the highest in terms of foreign buyers, the majority of them working in Singapore. See Figure 3.
The first phase of 3Residen which was launched late July 2007, comprises of 102 units within the 18-storey tower, while the second phase encompasses 76 units within the 13-storey tower, targeted launch date of the second phase is expected to be sometime in early 2008.
The entire development is expected to be completed by 2010.
Figure 3: Foreign Buyers’ by Nationality Jan – May 2009
Smart Investor sought insights on the Singapore market with the CEO of Singapore’s leading professional real estate agency, PropNex Pte Ltd, Mohd Ismail.
“The Singapore Property Market is still a buyer’s market, despite the fact that the private property price index is stabilising from its plunge in 1Q09. The number of private property transactions has also exceeded 1,000 per month from February this year, despite a still-ailing economy. As a comparison, October, November andDecember 2008, and January 2009, saw only 112, 192, 131 and 107 units sold respectively. The demand has obviouslypicked up and while the figures have yet to exceedthe boom of 2007, they are definitely far above the slow-down period and slump in end-2008.This is the same for both the primary and secondary market, with new launchesappealing more to short-term investors and the secondary market appealing more to the mid-to-long term investors and homeowners. In fact, many HDB owners are taking this opportunity to upgrade to private property because the gap between the price indices is so narrow.”
In addition to the above, Developers have also discounted prices by as much as 30 to 40 percent in the central area.
Figure 4: Prime Residential Price Index (Source : URA Singapore)
Popular Areas
High net worth individuals and institutional buyers have shown strong interest in the premium properties in the Orchard Road precinct. Research suggests that about 34 percent of private property buyers in Orchard Road are foreigners, compared to the national average of 20 percent
Other popular areas include the Bukit Timah residential stretch – coveted for the high-end properties there. Near Orchard Road, it is a gentrified area with lush greenery and a variety of intimate dining and entertainment options. Foreign clubs in the area include The Swiss Club, British Club, Singapore Island Country Club and the Raffles Town Club.
Farther out from the city, there are two suburban centres that are in hot demand. In the west, a new, revamped Jurong Lake Precinct is taking shape. A variety of developments will turn it into a bustling waterfront hub, with swish offices, shops, complete host of entertainment and dining options.
Ismail remarks that the popular areas were traditionally District 9, 10 and 11, because of their central location and potentially high returns. Another area which has seen a jump in popularity in relatively recent times would be District 1, which is the Sentosa area. This area has seen greater interest with the impending launch of the Integrated Resort, with Singapore’s CBD virtually in the backyard of properties here.
Financing Your Investment
Generally, foreign buyers can borrow up to 70 percent of the purchase price – depending of course on the bank’s credit assessment. Banks in Singapore routinely deal with foreign buyers so the process is relatively straightforward. The loan will be in Singapore dollars and the tenures usually vary from five to 35 years.
Ismail cautioned foreign investors that the local banks in Singapore do not offer loans to British Virgin Island companies as those are not registered companies in Singapore.
Capital to invest in Singapore
Foreign buyers need to pay 30 percnt of the purchase price within eight weeks from the Option date. “Before entering the market, a potential investor should have the following financial resources: 30 percent of the purchase price; stamp fees (three percent of the purchase price less SGD5,400); legal fees of a few thousand dollars (although the loaning bank may absorb most of this); and renovation and furnishing costs,” explains Ismail
The following is the payment schedule for uncompleted properties:
Stages of construction |
% of purchase price |
Option to Purchase granted |
5 – 10% (booking fee) |
Upon signing of Sales & Purchase Agreement or 8 weeks from Option date |
20% less booking fee |
Upon completion of: |
|
Foundation work |
10% |
Reinforced concrete framework |
10% |
Brick walls of unit |
5% |
Roofing / ceiling of unit |
5% |
Electrical wiring, internal plastering, plumbing and installation of door and window frames |
5% |
Car parks, roads and drains serving the housing project |
5% |
TOP (when developer is ready to hand over the vacant possession of the unit) |
25% |
On Certificate of Statutory Completion |
15% |
Restrictions in Foreign Ownership of Property in Singapore
There are no restrictions in foreign ownership of condominiums and apartments. For landed homes, foreign buyers have to obtain approval from the Singapore Land Authority.
Is now the right time to invest in Singapore?
This is still very much a buyer’s market. Although prices are picking up for some launches, the price index is still far below the peak witnessed in early-2008. Perks such as the Interest Absorption scheme, whereby the developer absorbs the interest of the bank loan until TOP, are also among the carrots being used to entice buyers to pick up units. Buyers are seeing tremendous value in the current property market.
As always, Singapore is a good location for property investment for many reasons: stable socio-political landscape, a good infrastructure that is constantly improving, a relatively stable economy due to good fundamentals and limited land supply. The opening of the IRs should also positively influence the prices of properties in those areas.
Investing overseas has its challenges and though opportunities abound, it is best to do more research before jumping into any investments abroad.
Chan Ai Cheng
General Manager, S. K. Brothers Realty (M) Sdn Bhd Registered Estate Agent with the Board of Valuers, Appraisers and Estate Agents Malaysia (LPPEH), Member of the Institution of Surveyors Malaysia (ISM), and the Malaysian Institute of Estate Agents (MIEA), Registered Financial Consultant with the International Association of Registered Financial Consultants (IARFC), For any feedback on this article, please email aicheng@skbrothers.com
