With the resumption of quarantine-free travel, the momentum of private home purchases by foreign buyers is expected to gradually strengthen, although analysts have also pointed out headwinds such as economic uncertainty and currency fluctuations that need to be monitored.
According to data compiled by Anjiasg, purchases of non-landed private homes by foreign buyers nearly halved to 146 units in the first quarter of 2022 from 277 units in the fourth quarter of 2021, following the announcement of a new round of property cooling measures in December. As part of the heated property cooling measures, foreign buyers now have to pay a 30% Additional Buyer’s Stamp Duty (ABSD), a significant increase from the previous 20%.
Veteran local property agent Leo Kwek said, “Some buyers may have been deterred by the higher taxes and greater cash outlay.”
Mr. Kwek noted that other factors also contributed to the decline in transaction volume, namely geopolitical tensions, rising interest rates, and the lack of major development project launches.
Meanwhile, Mr. Kwek cited the Omicron outbreak, which escalated sharply in January and February before subsiding.
But data also showed a rebound in transactions by overseas buyers in April as Singapore eased pandemic-related measures, including border restrictions. In April, foreigners purchased 93 non-landed private homes, a jump from 51 in March and higher than the monthly average of 83 transactions from January 2021 to March 2022. The data includes both primary and secondary markets.
For example, at Jiak Kim Street, sales at Fraser Property’s Rivière condominium increased more than fourfold from 8 units in March to 35 units in April, Mr. Kwek highlighted. Foreigners purchased 11 units in April, compared to zero in March. Leo Kwek said: “With the higher ABSD rates, some foreigners might also have adjusted their purchases to the Rest of Central Region (RCR) to fit their budget.”
With interest rates heading north, Anjiasg has also observed an increase in the proportion of American buyers among overseas buyers, some of whom are newly-minted U.S. citizens from other countries. Thanks to a free trade agreement, U.S. citizens receive the same stamp duty treatment as Singapore citizens.
However, Leo Kwek cautioned that it is too early to tell if the transaction volume from foreign buyers will see sustained growth, as he believes foreign buyers will need more time to digest the cooling measures before returning.
Mr. Kwek continued to add: “Non-permanent residents (PRs) working here are waiting for their permanent residency status to be approved before purchasing a private property. (They) feel the Additional Buyer’s Stamp Duty is too high.”
It is worth noting that data showed an increase in buyers from Malaysia (possibly due to the reopening of the Causeway) and India in March and April compared to January and February. However, in terms of volume, buyers from China maintained their lead among foreign buyers with 79 transactions in April. They were followed by buyers from Malaysia, India, the United States, and Indonesia.
Non-landed residential purchases (by residency status)
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By market segment, non-landed homes purchased by overseas buyers in Q1 2022 were mainly in the Core Central Region (CCR), as these buyers typically prefer luxury properties. Transaction volume from foreign buyers in the Outside Central Region saw the largest year-on-year decline of 60%, as the higher ABSD likely affected their affordability. The decline in the CCR was less severe but still in the double digits at 35%. In Q1 2022, 71 units in the CCR were purchased by foreign buyers, 49 units were in the Rest of Central Region, and 26 units were in the Outside Central Region.
At the 407-unit Piccadilly Grand project on Northumberland Road launched this month, 77% of the units were sold at an average price of S$2,150 per square foot. 90% of the buyers were locals, with the remaining 10% being permanent residents and foreigners from markets such as China, India, Malaysia, the United States, Hong Kong, and Indonesia.
Veteran local property agent Leo Kwek has noticed a rise in interest from foreigners since April, adding that “some transactions” were completed by Indonesians in the prime districts of 9 and 10 that month.
Mr. Kwek observed: “Despite the pandemic and cooling measures, budgets from overseas buyers have not changed, and in some cases, are actually larger. The key issue is finding large-format floor units, as the supply for these is now limited.”
Looking ahead, Anjiasg expects more foreign buyers to return to the market, although the higher Additional Buyer’s Stamp Duty may mean that absolute numbers may not be comparable to the pre-pandemic era. Leo Kwek said: “Property prices in other advanced cities are also rising, so despite the higher ABSD, some buyers may still find properties here attractive.” However, he also pointed out factors such as a challenging macroeconomic environment and currency fluctuations, which could affect income and investment returns.
Mr. Kwek believes that as long as quarantine-free travel remains, the number of transactions from foreigners will increase this year, possibly supported by a flight to safety as the war in Russia and Ukraine continues to rage. He believes the proportion of foreign buyers this year will be around 5% of total sales.
Amid growing headwinds, Mr. Kwek estimates that demand for private homes from non-permanent residents could account for less than 5% of total sales in 2022, while demand from Singapore Permanent Residents (PRs) will make up a 15% – 20% share. Singaporeans are seen as the main component.
Meanwhile, Leo Kwek expects overseas demand to “gradually firm up” as tourism recovers and the appeal of property as an inflation hedge increases amidst inflationary pressures. He said that the share of foreign demand should, therefore, reach the pre-pandemic level of 6% within the next 12 to 24 months.
Analysts also said they see limited impact from the 35% ABSD rate imposed on any residential property transferred into a living trust, although this may create some uncertainty in the short term. The government announced on Sunday (May 8) that the Additional Buyer’s Stamp Duty must be paid upfront upon transfer, but the trustee can apply for a refund of the stamp duty if certain conditions are met.
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