Terry Ward
Updated on: October 13, 2024 5:50 am GMT
Singapore’s real estate market is witnessing a remarkable shift. Despite the city’s growing allure for wealthy individuals, the number of private homes purchased by foreign buyers is shrinking dramatically. According to recent data from the Urban Redevelopment Authority (URA), only 321 condominium units were sold to foreigners between May 2023 and April 2024. This figure marks a steep decline from the previous year, which saw 1,054 units purchased. So, what’s happening in Singapore’s property market?
Declining Sales due to Regulatory Changes
Foreign investment in Singapore’s housing sector has taken a hit primarily because of regulatory measures. The introduction of a 60% additional buyer’s stamp duty (ABSD) on non-residents has significantly deterred foreign buyers, especially in the high-end residential market.
- Recent trends:
– From May to August 2024, the number of units sold dropped further, averaging about 22 sales per month.
– In previous years, sales averaged around 88 units monthly.
According to Harmeet Singh Bedi, managing director of Christie’s International Real Estate Singapore, “These tighter regulations make this market all the more attractive to us.” He believes that Singapore’s property remains appealing due to its stable investment environment and the government’s sustainable policies.
Attracting Wealth Amid Decline
While foreign purchases have declined, Singapore continues to attract high-net-worth individuals. The 2024 World’s Wealthiest Cities Report from Henley & Partners reveals that 3,400 such individuals relocated to Singapore in 2023, increasing the number of resident millionaires to approximately 244,800.
- Who’s moving in?
– Centi-millionaires: 336 individuals with wealth exceeding $100 million.
– Billionaires: 30 in the city-state.
Furthermore, the number of single-family offices—entities managing the investments for affluent families—has soared. From just 400 in 2020, this figure reached 1,400 by the end of 2023, signaling continued interest in wealth management despite challenges in the residential market.
Shifts in Investment Focus
The recent surge in family offices primarily leads to investments outside residential properties. According to Ms. Wong Siew Ying, head of research at PropNex, family offices face a steep 65% ABSD when purchasing residential property, making commercial opportunities more appealing.
- Current Investment Directions:
– More family offices are investing in commercial properties where ABSD does not apply.
– Minister of State for Trade and Industry Alvin Tan noted in Parliament that Singapore-based family offices have not impacted the private housing market significantly.
Changing Player Dynamics
Interestingly, Americans have taken the lead in non-landed private home transactions in Singapore, surpassing Chinese buyers in 2023.
- Statistics:
– 91 transactions by Americans compared to just 17 by Chinese buyers.
– As of September 3, foreigners accounted for only 4.7% of landed and non-landed private homes sold.
This trend highlights shifting buyer preferences, possibly influenced by regulatory environments in their countries of origin.
Long-term Outlook for the Luxury Market
Despite current difficulties, some market experts remain optimistic about the future of Singapore’s luxury real estate sector. As Harmeet Singh Bedi notes, “The market still has a strong potential, justifying high-end prices amid increasing global affluence.”
Chia Siew Chuin from JLL believes that high-net-worth individuals might outweigh acquisition costs due to Singapore’s status as a secure investment hub. Many of these wealthy individuals are already working toward obtaining permanent residency or citizenship to lower their tax burdens, enabling better investment opportunities in residential properties.
- Benefits of Permanent Residency:
– PRs pay only 5% ABSD on their first property purchase.
– Citizens face a 20% ABSD on their second property purchase.
Market Responsiveness to Regulatory Changes
However, for any significant recovery to occur in the luxury segment of the market, changes to the existing ABSD framework will be essential. Industry experts suggest that revisions could entice foreign buyers and rejuvenate interest in Singapore’s premium real estate.
Mandeep Nalwa, group chief executive of Taurus Wealth, agrees, emphasizing that while foreign interest remains strong, the high ABSD rates have redirected investments predominantly to commercial properties instead of residential ones.
Stay updated with the latest real estate trends in Singapore.
Conclusion
Singapore’s real estate market is facing some big changes. There are fewer foreign buyers right now, which makes people wonder what will happen next. However, Singapore is still a popular place for wealthy individuals who want to live there. If the government makes smart changes to taxes and keeps the market stable, there is a good chance that the luxury home sector can bounce back. For now, foreign buyers are still interested and are learning to adjust to the new property situation.
