The cooling measures introduced in July 2018 have dampened overall home-buying demand but in the top end of the condo market, foreigners may have shown more resilience.
Drawing data from the Urban Redevelopment Authority’s (URA) Realis, a report by ERA Research & Consultancy showed that the number of non-landed private residential units in the Core Central Region (CCR) bought by Singaporeans sank some 38 per cent to 2,427 units after the curbs, while that for foreigners including permanent residents declined by about 30 per cent to 1,264 units. Residential purchases by companies in the same region shrank by nearly two-thirds, going from 142 units to 49 units.
The ERA report covered transactions for non-landed units in Districts 9, 10 and 11, Sentosa Cove as well as Downtown Core – that is, the CCR – and excluded both landed housing and executive condominiums. It compared data for the 18 months prior to the cooling measures (January 2017 to June 2018) and the 18 months after the curbs (July 2018 to December 2019), and included permanent residents under foreigners.
Nationwide, the volume of private housing units purchased fell about 23 per cent from 32,866 units before the market curbs to 25,270 units after. The breakdown for Singaporean buyers was a 20 per cent dip while that for foreigners slumped 32 per cent.
Data from Realis may not include purchases where a caveat wasn’t lodged with the Singapore Land Authority.
Aside from tighter loan-to-value limits on private home purchases, the latest wave of measures brought higher additional buyer’s stamp duty (ABSD). The ABSD for Singaporean citizens buying their second residential property was hiked from 7 per cent to 12 per cent, while those purchasing their third and subsequent property have to fork out 15 per cent ABSD, up from 10 per cent previously.
Permanent residents (PRs) have to stump up 15 per cent ABSD for their second and subsequent properties, while foreigners are subject to a 20 per cent ABSD rate on any residential property.
Zooming in on the luxury residential real estate segment, the ERA report said “foreign buying demand was more resilient than local demand in the face of the latest cooling measures”, suggesting that some foreign buyers who were willing to pay the higher ABSD were high net worth individuals who were only interested in luxury homes.
“Foreign buying demand in the high-end residential market weathered the cooling measures better than foreign demand in the rest of the real estate market, illustrating that the underlying demand for prime real estate from foreign homebuyers was still relatively healthy,” the report also highlighted.
In absolute terms, “Singapore citizens have always been the largest group of buyers of luxury homes in Singapore, even after the 2018 cooling measures”, the report said.
The proportion of Singapore buyers of non-landed housing units in the CCR was about 65 per cent for July 2018-December 2019, compared to 34 per cent for foreigners and slightly over one per cent for companies.
Separately, some analysts also pointed out that since lodging a caveat is optional – for instance, in a scenario where the property is paid for fully in cash – not all transactions might be captured.
In particular, the number of units bought by citizens from seven countries – namely Cambodia, Vanuatu, Cyprus, Dominica, Thailand, Denmark and Spain – actually went up, ERA’s report showed.
The largest jump in the number of units purchased came from Cambodia, with volumes going up nearly 113 per cent from eight homes to 17 homes. In percentage terms, the number of transactions from buyers from Dominica in the West Indies was the highest, going from one unit to five units, or up 400 per cent.
Christine Li, Cushman & Wakefield’s head of research (Singapore and Southeast Asia), suggested that some China-born new citizens in those territories could be behind these transactions, “as quite a number of countries offer citizen by investment schemes”.
For instance, in October last year, The Business Times reported that Vanuatu citizen Xie Zhijing was buying a penthouse at TwentyOne Angullia Park for S$32 million.
The Cyprus passport was ranked the eighth most powerful passport in the most recent Passport Index, which “could have attracted some Chinese investors”, Ms Li went on to add.
Meanwhile, the ranking of the biggest group of foreign buyers of high-end non-landed residential property was largely unchanged, even as the number of units purchased by buyers from those territories decreased following the cooling measures, the ERA report showed.
Post-curbs, China nationals bought 380 non-landed units in the CCR – albeit down about 30 per cent – making them the largest group of buyers of high-end residential units after Singaporeans.
Buyers from Indonesia leapfrogged Malaysia to clinch second spot as they purchased 149 non-landed homes in the CCR. American citizens remained in fourth place, and buyers from Taiwan and Hong Kong rounded off the top five. Buyers from India slid down the rankings from fifth spot previously to 10th as they “beat a surprisingly rapid retreat from the CCR market”, the report noted.
Faced with a heftier ABSD, India nationals might have turned to other emerging markets as an investment destination, such as Sri Lanka, said Ms Li.