For ultra-high net worth individuals (UHNWI’s), Singapore ranks as one of the world’s most popular locations. In a recent study by Citi Private Bank-Knight Frank Wealth Report, the island ranks as the second favourite country for the rich to purchase a second home, and the number one for owning a principle residence. The main factor for Singapore’s popularity lies in its excellent quality of education, as well as a steady political and economic climate.
(Singapore: it's a rich's man world. Image courtesy of Singapore Tourism Board.)
Apart from the education factor, which particularly attracted Indian and Chinese individuals, Singapore’s generous tax schemes and low pricing of luxury properties were reasons to set up a base in the country. Comparatively-sized homes in Hong Kong, Tokyo, Paris and Monaco, for example, cost much more. The 2011 report was based on a survey completed by 160 Citi Private Bank wealth advisers who, in total, work with close to 5,000 UHNWI’s from 36 countries. The average net worth of each high net-worth individual was US$100 million.
Rupert Hoogewerf, who publishes the China-based Hurun Report which profiles rich individuals in the country, explained to Business Times that the condition of property markets is often a decision-maker for individuals assessing universities. “A property for [university-going] children to live in is an obvious step to take and a very popular investment option,” he said.
This month has seen the number of house loans drop to the lowest level seen in a year.
(Singapore's property market may be standing tall, but the numbers of housing loans are falling. Image courtesy of Singapore Tourism Board.)
However, it seems like this isn’t the lowest point they could fall to. Experts believe that this is due to the market not yet realising the full impact of the cooling measures brought in by the government in January.
At the moment the value of outstanding home mortgages stands at an estimated $115.3 billion. This is only a 0.95% rise from the figures from the end of January; the lowest growth rate since February 2010.
Kenneth Ng, an analyst from CIMB bank said that the effects of the government’s cooling measures probably won’t be seen until next year. Speaking to The Strait Times, head of personal financial services for HSBC Greg Zeeman qualified this prediction. He said that “the effect of the cooling measures may be evident only later as the data captures home loans booked two to three months ago”.
Although, this month’s slow could just be the fallout from Chinese New Year. At the end of February last year the growth was 0.93% according to the Monetary Authority of Singapore.
Analysts are saying that the growth figure isn’t a concern yet, as the low mortgage rates offered by many banks will help support the market. Just to give one example, UOB have a limited time offer that provides first-year rates at 0.68% and the second-year at 1.39%. Offers like this should have the house loan figures rising again before too long.
Last week’s suggested proposals from the Urban Redevelopment Authority (URA) may cause house prices to peak and trough unexpectedly. The plans could mean that property agents have to release home prices before they go on sale.
It has now been said that developers must release price lists of any new projects two days before it is launched. Providing buyers with this knowledge will allow them to make more educated purchases, but could cause prices to heat up in an already fast-rising market.
Speaking to The Straits Times, Mr Png Poh Soon, Knight Frank’s head of consultancy and research, said “in that kind of a market where prices are high, seeing those prices climbing might prompt people to buy in case they get priced out”.
However, the head of research for Jones Lang LaSalle, Dr Chua Yan Liang, said that “it works both ways. If the market is feeling negative, it might lead to a further donward spiral of prices as more people hold back on buying property”.
The proposals are still waiting to be implemented, with the URA seeking public opinion up until 18 March. Their main aim, as always, is to make homebuyers feel more empowered and informed.
On the proposals, Mr Png said that “rather than going down to the show flat and feeling pressured by agents, buyers can sit down and gather the information in a cool-headed manner”.
It seems as though most of the public and developers are supporting the proposals. They believe that the changes would allow buyers to feel more confident, and avoid any allegations of ‘mis-selling’ for the developers. Dennis Wee Group direct Chris Koh said to The Straits Times that “once [we] received a complaint after a buyer found out the neighbouring unit was sold for less. He was upset because he thought he could have obtained a better deal and we had to explain that factors like a better view and layout affected the price”.
The future for homebuyers could allow them to become more aware of the property market, especially if all figures are available from the start.
Figures from real estate group Jones Lang Lasalle reveal that in this quarter, mainland Chinese buyers purchased 241 homes in Singapore, more than any other group of foreigners. This figure makes up 8% of all non-landed sales and 22% of all purchases by non-Singaporeans in the past three months.
(Rising dragons. Chinese spending power in the Singapore property market continues to increase. Image courtesy of Singapore Tourism Board.)
Speaking to the Straits Times, a GPS Alliance agent explained that “there are a lot of Chinese immigrants here and their mindset is that renting is expensive, so they would rather buy.” Mr Teo had recently sold a Bishan Loft unit to a Chinese PR.
A study done last year by DTZ Research, a multinational company that does investigations into commercial property markets, showed that the trend was already becoming apparent. Chinese buyers had overtaken Indonesians in terms of the number of homes bought, and they have now outdone the Malaysians, who were previously first.
Industry authorities say that the safe environment that Singapore represents is an attraction to Chinese buyers with cash to spend. The stricter rules introduced in China for home-buying has prompted investors to look elsewhere for property, such as Australia and Southeast Asia.
Director of residential at OrangeTee, Steven Tan, commented that a clear trend was growing. “Things are already changing this quarter… This trend is likely to continue, with the Chinese increasingly significant in their buying power.”
Homeowners are being pushed to buy smaller and cheaper homes due to the last two sets of government measures to cool the property market.
(Small homes, but the average shophouse is way out of the price range of most Singaporeans. Image courtesy of Singapore Tourism Board.)
The slashed loan-to-value (LTV) ratio - how much you can borrow based on the value of your current property - seems to have had a huge affect on the Singapore property market. It was cut from 80% to 70% back in August, but now has been dropped again to 60% in January of this year. This all means that homebuyers have to have more cash upfront.
This is forcing people to instead opt for apartments that are much smaller than average: under 861sq ft according to statistics taken between January and February at the beginning of this year. Plus, it seems like homeowners are looking for units that are priced at less than $800,000, as recorded by property firm International Property Advisor (IPA).
From January to August last year, 30% of homebuyers opted for the units below 861sq ft, which rose to 42% after August, then now to 46% after the announcements of the latest cooling measures in January this year. Over these three time periods, the percentage of homebuyers opting for cheaper homes rose from 22% to 28% to 30%.
IPA chief executive Ku Swee Yong noted, when speaking to The Straits Times, that “today, investors are forced to think smaller due to the higher cash down payment required and the lower 60 per cent LTV ratio for mortgages”. He also said that “the impact of the upfront cash requirement and the reduced borrowing limit has herded more investors towards smaller units and towards projects in the outskirts of Singapore”.
A report has been released by commercial real estate advisory company, CB Richard Ellis (CBRE), which follows the spending trends in the investment property segment. The first quarter of this year has seen in a shift in how the homebuyers’ money is being spent.
(Money to burn? Performers spark it up at the Singapore Night Safari. Image courtesy of Singapore Tourism Board.)
It seems as though those purchasing property as investments have increased dramatically. The spending amount for the first three months of this year has risen to $7.32 billion, which is a 67% increase from the same period last year. These figures are based on transactions which include those of residential property, government and private sales of land and building.
On residential property alone, homebuyers have spent $3.11 billion. This made up a huge proportion of the figure recorded for investment sales this quarter, and 50% higher than those recorded at the beginning of last year.
This quarter has also seen en bloc sales pick up. Sites such as the former Ulu Pandan HUDC Pine Grove has been put back on the market, whilst Newton View (near Novena MRT) has been sold for $147.6 million.
The report by CBRE has also noted that in this first quarter of 2011, hotel investment has summed up to 12% of the total investment sales with $874.76 million spent so far. This figure was made mainly from the Gopeng Street and Peck Seah Street transaction, costing $194.77 million, along with two private sector deals.
With Malaysians usually being the largest proportion of homebuyers in Singapore, it was surprising to see that for the first three months of this year the Chinese have taken over.
(Just who is making themselves at home in Singapore these days? Image courtesy of Singapore Tourism Board.)
Chinese buyers have purchased more homes from the start of this year than any other nationality. According to research from Jones Lang LaSalle (JLL), mainland Chinese, which includes Singaporean PRs (permanent residents) have bought 241 homes this quarter. This figure meant that the Chinese bought 8% of all non-landed sales and the substantial 22% of all foreigner-bought properties this quarter.
Real estate experts say that the sudden surge in Chinese buyers could be down to the tightening of home-buying policies in China. These include restrictions on residents in major cities buying a second or third home, which is noticeably causing Chinese buyers to look at other countries.
Mr Jack Teo, an estate agent from GPS Alliance, when speaking to The Straits Times said “there are a lot of Chinese immigrants here and their mindset is that renting is expensive and so they would rather buy”. He continued by saying that “some [Chinese] parents might be looking for affordable homes of less than $1 million to buy for their kids studying here”.
The JLL research also showed that the Chinese buyers have occupied two extreme ends of the property market. They are either buying into the mass-market segment or the ultra-posh homes worth $5 million or more.
Director of real estate company OrangeTee, Mr Steven Tan, said that he has “noticed a clear trend since the limitations were introduced and can already feel things changing this quarter… This trend is likely to continue, with the Chinese increasingly significant in their buying power”.
The Chinese buyers have meant that Malaysians are now the second largest percent of buyers, with Indonesians in third and Indians close behind.
