Time to open the gates?

In the eyes of some, at least, there may never be a better time to slaughter one of the sacred cows of the landed home market.

The idea of owning a nest in Singapore is becoming increasingly attractive to foreigners. The Government, too, has been effusive in its efforts to draw foreign talent here to build the economy.

So why not relax restrictions on the sale of landed property to foreigners — and satisfy both needs at one go?

Making this controversial proposal in a report released on Sunday, Goldman Sachs — one of the world’s largest investment banks — cited suggestive figures.

The proportion of foreigners buying private homes here climbed to 26 per cent in the first quarter of the year, up from 21 per cent in 2005. But as of May, foreigners were involved in only 8 per cent of landed property transactions this year — compared with 29 per cent of apartment transactions. The average price of a top-end bungalow falls short of that of a luxury condominium unit by about 35 per cent.

“We think this price gap could narrow to parity, or very close to it, should restrictions on foreign ownership be relaxed,” said the report, adding that “foreigners would like the flexibility of greater housing choice and the positive signal of Singapore’s open door policy emanating from such a move”.

But the argument will be a thorny one for the Republic to swallow, given the socio-political barbs of such a move. And going by industry players’ reactions, the debate is likely to remain an academic one.

Since 1973, the Residential Property Act has restricted foreigners and permanent residents from owning private residential property without prior official approval — and for good reason.

“The restrictions on foreign ownership of landed property is unlikely to be eased because it is an emotional issue. It involves (putting) a tangible, physical part of Singapore in foreign hands,” said Mr Colin Tan, director for research and development at Chesterton International.

“Landed properties should not be priced out of Singaporean’s reach (or) it could lead to disgruntled Singaporeans, which would be a cause of concern for the Government,” said Mr Charles Chong, chairman of the Government Parliamentary Committee for National Development and Environment.

Even so, a concession was made in 2004 for Sentosa Cove (picture), where potential foreign buyers were given fast-track approval. Of the 36 landed transactions at Sentosa Cove, 44 per cent involved foreigners. A seaview bungalow plot within the luxury enclave set the record at $1,308 per square foot.

But that is most unlikely to herald any universal lifting of control over landed property ownership in Singapore, say property analysts.

Goldman Sachs argues in its report that removing such restrictions would not hurt the national objective “of giving Singaporeans a stake in the country”; neither would it price them out of the market.

It reasoned that the public housing market met the needs of 80 per cent of Singaporeans by making affordable homes available. The report also conceded that any policy change could be limited to selected types of landed property, such as good-class bungalows.

But Mr Ku Swee Yong, director of marketing and business development at Savills Singapore, argued that the influx of buyers would give landed property owners the upper hand in this land-scarce environment. “It would be a sellers’ market. This will definitely have an immediate impact on prices,” he said.

According to forecasts released by property firm CB Richard Ellis yesterday, home prices are estimated to have risen by 4 to 6 per cent between April and June, and they are expected to climb by another 3 to 5 per cent. One driving factor: The limited supply of new homes in the $600 to $800 psf price range.

Mr Nicholas Mak, Knight Frank’s director of research and consultancy, said: “Prior to the Residential Property Act, rich Indonesians snapped up properties, pricing Singaporeans out of the market. Today, high-end property prices are up. That is starting to filter down to the mid-tier properties.”

He added that keeping certain privileges of home ownership for citizens only “encourages foreigners to commit to Singapore, to sink their roots here”.

Chesterton’s Mr Tan added: “Some things have to be preserved for Singaporeans. Landed property ownership is one of them. It is the privilege of being Singaporean.”

Source: Today, 26 June 2007

Join The Discussion

Compare listings