Singapore has long been valued for its political stability, strong financial sector, open economy and stable currency. Moreover, Singapore government’s proactive and progressive stance in handling global economic crisis and harnessing technology to stay ahead as a global city bodes well for multi-national corporations to set up their regional and international headquarters here. In recent years, several ultra-high-net-worth families from Asia, as well as some from Europe and America, set up family offices in Singapore as they are keen to use Singapore as a gateway for their investments into Asia.
Foreigners are allowed to buy and own apartments and condominiums in Singapore, either completed or under construction. However, they are not allowed to own landed houses (bungalows, detached houses, semi-detached and terrace houses) on the main island with the exception of those at Sentosa Cove, which is a resort lifestyle enclave on Sentosa Island where special permission will be granted for foreigners to purchase landed property.
In the 1990s up to 2002, the proportion of foreign homebuyers (permanent residents [PRs] and non-permanent residents [NPRs] combined) made up less than 20% (except 1997). Thereafter, it had remained above 20% to this day and even crossed 30% during the boom years of 2007 and 2011. Transaction data from URA-Realis shows that foreign buyers hit record numbers of 9,723 in 2007 and 9,748 in 2011. Such numbers have not been seen again from 2012 to the present.
One of the key reasons for the growth in foreign homebuyers from 2003 onwards is the government’s stance in opening the Singapore economy to foreign investors. In 2004, foreigners were invited to buy land parcels for development in Sentosa Cove. A year later, the government announced that two integrated resorts will be developed in Singapore, which created more job opportunities for both locals and foreigners. In the period between 2005-2011, the PR population in Singapore grew by 38% from 387,000 to 532,000. Within the same period, the NPR population grew by 75% from 798,000 to 1.39 million. This probably explained the spike in foreign homebuyers between 2006 and 2012.
The number of foreign homebuyers also rose significantly as home prices were climbing in the periods of 2006-7, 2009-11 and 2017. In fact, the number of NPR buyers outstripped PRs in 2007 and 2011. The strong buying of projects by foreign homebuyers prompted the government to step in with cooling measures in 2011. The Additional Buyer’s Stamp Duty (ABSD), was first introduced at 10% in 2011 and subsequently raised to 15% in 2013.
The market seen the number of NPR buyers fell from 5,590 in 2011 to 2,283 in 2012 and to 1,150 in 2014, falling at a faster rate than PRs who were subject to less severe ABSD rates than NPRs. Most recently, the ABSD rates were raised again in 2018 July because of the rapid rebound in prices along with the return of foreign homebuyers. As expected, there was a noticeable reduction in the number of PR and NPR homebuyers since H2 2018 to the present.
Top Foreigner Buyers
The top foreign buyers were mainly from neighbouring countries and Asia.
Indonesians formed the top foreign buyers in the early years in 1996 and 1997. The Indonesians were always known to be keen investors of high-end projects in districts 9 and 10.
Malaysians, subsequently took over the top spot from 1998 to 2003, which is unsurprising as a lot of them work and live in Singapore. Buyers from Malaysia and Indonesia were interchangeably the top foreign buyers from 1995–2010.
Buyers from Mainland China became the top foreign buyers in Singapore since 2011 with the exception of 2012 and 2015. The Chinese are in the second position in year 2012 and 2015 with buyers from Malaysia taking the top spot from China.
The Chinese come to Singapore for both their children’s education and in search for employment or business opportunities. Homebuyers from India who were drawn by opportunities in the IT industry made up another top group of foreign buyers.
American homebuyers have also been on the rise, probably because of the free trade agreement which allows American nationals to enjoy the same ABSD rates as local homebuyers.
Other nationalities buying homes in Singapore include Australians, British and Taiwanese.
Fast Forward to 2019
New cooling measures were put in place in July 2018 after a wave of en-bloc frenzy and a hike in the residential price index. The number of foreign buyers started to fall following the new measures and deteriorated further due to geopolitical tensions (Brexit, US-China Trade war).
Home buyers from Mainland China and Malaysia retained their first and second positions while India moved up to the third place. These three nationalities have been the top three groups of foreign homebuyers since 2017. Indonesian homebuyers had fallen to the fourth position since 2017. One of the reasons for the decline could be the tax amnesty strategy which was introduced since 2016 to encourage taxpayers to declare their assets abroad.
Projects which attracted foreign homebuyers include Boulevard 88, Marina One Residences, South Beach, Avenue South Residence, One Pearl Bank, Parc Esta, Parc Clematis, Riverfront Residences, The Florence Residences and Treasure At Tampines.
Outlook
The total number of foreign homebuyers in 2019 stood at 3,648, a reduction of 18% from the 4,450 in 2018 as market sentiments were dampened by a global economic slowdown.
The Singapore economy was beginning to show signs of stabilisation from the slowdown in 2019 until the outbreak of the novel coronavirus posed a new threat. Besides tourism and its related sectors being the worst hit, the current travel restrictions will put brakes on the momentum of home buying by Mainland Chinese.
If the virus outbreak ends soon, business would resume and sentiments would improve. Should the Covid-19 crisis be prolonged, more countries will likely impose travel advisory and discourage outbound travels. While it is too early to project the magnitude of the impact, some moderation in home prices and decline in home sales volume would be inevitable. This might bode well for opportunistic buyers looking to pick up some good value buys.
With Singapore’s strategic position as an Asian gateway, the strong fundamentals will continue to attract the affluent in an increasingly uncertain global environment. Part of the drop in Mainland Chinese buyers could be picked up by other nationalities looking to invest in Singapore, in particular the new affluent from developing countries, such as Cambodia.