Singapore is a prisoner of its geography. Bounded by the Singapore Strait and the South China Sea beyond on one flank and the Malaysian border on the other, the city state has built up, down and out to maintain its growth. Skyscrapers dominate the skyline, and through a sustained programme of land reclamation, Singapore’s footprint has expanded by almost 25 per cent since the country gained independence in 1965.
Growth has been a consistent feature of the property market, too. Bar falls following the 1997 Asian financial crash and the global financial crisis in 2008, the residential property index has risen consistently for the past 40 years. In the year to the second quarter of 2010, the index rose 38.2 per cent, prompting fears of an overheating market and intervention from the Singapore government.
Government measures included stricter borrowing limits and the introduction of stamp duty on owner-occupied housing sold within a year of purchase. Such was the strength of the market, though, that it took 10 rounds of intervention to stymie growth. Values eventually began to tail off midway through 2013, but after almost four years of steady price declines, the last two quarters have seen values inch up again, and optimism has returned.
“For 2018, we expect prices in the private residential market to rise 12 to 15 per cent year on year,” says Alan Cheong, head of research at Savills Singapore. In his view, affordable homes and available credit never went away. Falling demand, he argues, was “behavioural in nature”, with doubt sown by the government affecting buyer sentiment. Even throughout 15 straight quarters of decline, “the Urban Redevelopment Authority’s private property price index fell just 11.6 per cent”, says Mr Cheong. “On the ground, some even felt that for new launches, prices hardly budged from 2013 levels.”
Mr Cheong is not alone in his optimism. Credit Suisse predicts a price recovery of 5 to 10 per cent in 2018, and Morgan Stanley and OCBC Investment Research anticipate an 8 per cent increase — putting Singapore top of the latter two’s Asean forecasts.
The rollback of some of the government’s cooling measures in March last year helped restore confidence in the private residential market, and sales began to increase. “Developers sold 10,682 units in 2017, a 34 per cent rise over the 7,972 units recorded in 2016,” says Mr Cheong.
Supply still outweighs demand, with the vacancy rate of private residential properties hovering around 8 per cent, or 30,000 units, for the past two years. Yet increasing demand and a surge in “en bloc” deals — where entire apartment buildings are sold for redevelopment — are likely to push prices up. “Fewer units available for sale in the secondary markets will channel more home buyers to the primary market,” according to Morgan Stanley’s report.
Foreign buyers constitute around a quarter of the total, says Mr Cheong, rising to a third in high-end developments. Buyers from the UK and US are common, but the bulk of foreign purchases come from surrounding Asian nations — India, China, Indonesia and Malaysia. There were even several buyers from the south Pacific nation of Vanuatu last year, adds Mr Cheong.
Buyers from elsewhere in Asia perceive Singapore as a safe haven, he says, and “the relative openness of the economy has made it a magnet for buyers who come from more restrictive and draconian political systems”.
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