The eight rounds of government cooling measures have hit Singapore’s property market over the last few years, have certainly taken their toll and the bad news for those in the industry is that things are unlikely to get better soon.
The measures have seen private property sales fell around 50% in June 2015 Urban Redevelopment Authority (URA) data showed and prime property prices in Singapore have fallen 15% year-on-year, according to the latest Knight Frank Global Prime Global Cities Index, making it the worst performer for the sixth consecutive quarter.
It’s true that for the latest figures published, for July 2015, Singapore home sales reached a two-year high, but almost three-quarters of those were for the competitively-priced High Park Residences project and the general opinion in the industry is August’s figures will be down again.
With an election possibly taking place some time in September, although a date has not yet been confirmed, National Development Minister Khaw Boon Wan is relieved the property curbs introduced by the government have resulted in a ‘soft landing’ for the once overheated housing market, which was a big issue in the last election. But property professionals are unlikely to be displaying similar emotions.
OPP.Today questioned Excell Chua, Business Development Director at leading Asian website PropertyGuru, about how the sector is likely to recover and how agents and developer sales are being affected.
Question: When do you expect the Singapore market to turn around?
Answer: The Singapore property market is unlikely to have a quick recovery. The Monetary Authority of Singapore (MAS) mentioned just last month that it’s too premature to ease the policies. We are probably looking at a period of stagnation for the next two years. Factors dragging the property market include increasing private housing inventory (surpassing the demand), rising vacancy rate, lower GDP growth, slower population growth, slower labour productivity growth and increasing restrictions on foreign talent, among other things.
Question: Is the market losing developers and agents as a result? If so, how many?
Answer: Our market is seeing a growing number of local anbd regional developers expanding their developments businesses abroad. (They either buy sites or have joint venture partners in Malaysia, Australia, UK, US & Thailand). This is because when they develop in Singapore, developers normally make 5% to 10% profit margin, but when they develop abroad their take home profits would average between 25% to 35%. On the other hand, we saw an exodus of over 2,000 property agents leaving major real estate agencies. There were 26,014 agents as of end of 2014, it’s now down by 8% to 23,947 agents as of the first of April this year.
Question: Is this a good thing or a bad thing for buyers?
Answer: It’s a buyers / renters market now so it’s definitely a good thing for the buyers. More property owners or bargain hunters are trying their luck at auctions these days. A recent Colliers International report showed that a total of 378 properties were put on auction during the first half of 2015, an increase of 38.5% from H2 2014’s 273 listings. According to Colliers, the auction rooms this year continued to be jam-packed with some sessions seeing an attendance of over 200 people but sales figures remain moderate as potential buyers prefer to go for private negotiations after auctions. On the other hand, the real estate agency business is not looking positive, recent reports show that only three or four big real estate players in Singapore are making profits this year (there were at least 1,425 registered agencies in Singapore as of 2014).
Question: If more Singaporean investors are looking to overseas property, which countries are they turning to?
Answer: Singaporean investors continue to be attracted to safe haven markets like London, Sydney & New York. There’s also a strong interest for investing in neighbouring countries (or emerging markets) such as Malaysia, Thailand, Philippines, Tokyo, Cambodia and Vietnam. Their major drivers for investing in overseas properties include: kids are in the universities, diversification of portfolio, second / holiday home, good rental returns & good capital growth.
Question: How long will it take for foreign investors to regain interest in Singapore and what will be the catalyst?
Answer: Since MAS mentioned that it’s too premature to ease the policies… I doubt it if ABSD (Additional Buyers’ Stamp Duty) for foreigners will be relaxed anytime soon (at least not next year). Foreign buyers need to pay an ABSD of 15% to buy private properties in Singapore since the government cooling measures were introduced in mid-2013. Foreign investors who plan to make Singapore their home or plan to stay in Singapore for a mid to long term period may not mind absorbing the ABSD fees, in my view. Some foreigners may find buying a Singapore property a viable option (than renting one). Also, most High Net Worth Individuals or Ultra Wealthy Foreign Investors that Singapore tends to attract won’t mind paying for the extra 15% taxes as most of these buyers are buying Singapore properties as their trophy homes. The beauty of investing in Singapore properties is that there is no Capital Gain Tax here, so this is a plus point! Singapore has always attracted world’s billionaires – one of them would be Eduardo Saverin (the former Founder of Facebook) who renounced his US citizenship in 2011 and moved to Singapore.