Foreigners buying fewer homes in Singapore

The view of the city from the Ion Sky observation deck. Overseas buyers traditionally add to demand for more expensive homes, including those in the central region and city fringes but their share of purchases has been on the decline.
The view of the city from the Ion Sky observation deck. Overseas buyers traditionally add to demand for more expensive homes, including those in the central region and city fringes but their share of purchases has been on the decline.ST PHOTO: ONG WEE JIN

Lower interest may have contributed to 1.3% drop in private home prices for third quarter

Foreigners have been buying fewer homes and possibly depressing prices in the process. Overseas buyers traditionally add to demand for more expensive homes, including those in the central region and city fringes but their share of purchases has been on the decline.

Foreigners picked up about 137 non-landed private homes in the third quarter, or about 4 per cent of overall non-landed sales.

This is down from 355 or a 9.2 per cent share in the third quarter of 2013 and 261 or a 10 per cent share in the same period last year.

"If their share continues to decline, the support for central region and some city fringe homes could weaken," said Ms Christine Li, Cushman & Wakefield director of research.

Buyers from the main nationalities have been holding back. Chinese buyers picked up about 163 private homes last quarter, down from 222 a year earlier, Indians bought 57, down from 100, Indonesians bought 39 units, down from 112, and Malaysians bought 184, down from 224, according to R'ST Research.

That reduced interest may have played a part in private home prices falling an estimated 1.3 per cent for the quarter, the largest fall over the eight straight quarters of decline, according to Urban Redevelopment Authority (URA) flash estimates yesterday.

The decline was seen across all market segments: prices down an estimated 1.3 per cent in the central region, 1.5 per cent in the city fringes and 1.6 per cent in the suburbs.

It is no great mystery why Chinese buyers are pulling back.

Their economy is slowing and the yuan has weakened slightly after China's central bank changed the currency regime in August, said Ms Selena Ling, OCBC economist.

Chinese tourist arrivals here fell in the first quarter and while marginally up in the second, may be down again in the third, she added.

A stronger Singapore dollar has weakened the purchasing power of buyers from the region, said Ms Li.

Indonesians have been scaling down on property purchases as their own residential real estate is performing better in terms of price stability, appreciation prospects and yields, added Mr Ong Kah Seng, R'ST Research director.

And the Additional Buyers' Stamp Duty (ABSD) rates have dramatically affected Singapore's attractiveness for real estate investment.

Singapore and Hong Kong share similar ABSD rates of 15 per cent for foreign buyers of private homes, but while Singapore home prices have languished, those in Hong Kong continue to set records, said Mr Alan Cheong, Savills research head.

"Once we factor in our relative distance to China versus that of Hong Kong, or comparing ourselves to Australia or other developed markets, Chinese nationals find it less attractive to buy here," he added.

At 15 per cent, the ABSD rate can be equivalent to renting out an apartment for five years if the gross rental yield is 3 per cent a year, Century 21 chief executive Ku Swee Yong noted.

The number of ABSD transactions by foreigners was 1,149 last year, down from 1,980 in 2013 and 2,432 in 2012, according to the Inland Revenue Authority of Singapore.

This formed just 15 per cent of all transactions that attracted ABSD. Singaporeans accounted for the bulk, or 46 per cent of these transactions. Foreigners paid $288.6 million in ABSD last year, down from $501.6 million in 2013.

Overall, total ABSD collection fell from $1.5 billion in 2013 to $920 million last year, with Singaporeans, permanent residents and foreigners contributing less.

ABSD collection from foreigners could be even lower this year due to slowing regional economies, said Mr Cheong of Savills.

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A version of this article appeared in the print edition of The Straits Times on October 02, 2015, with the headline 'Foreigners buying fewer homes here'. Print Edition | Subscribe