Singaporeans buyers loved the idea of Additional Buyers Stamp Duty (ABSD) when it was introduced in Singapore. They believed that ABSD will make housing affordable. In 2012 and 2013, it was believed that the private home prices were skyrocketing because more and more foreign buyers had arrived in the market. After ABSD was introduced, the housing market become less attractive for the foreign investors; however, it appears that things are going back to square one, the effects of the ABSD seems to be waning.
How much foreign investors earned?
According to the property consultancy JLL, there were 782 transactions performed by foreign investors (permanent residents not included) in the first 9 months of 2016. This figure is bigger than the figures in the same period in 2015, which was recorded as 691 transactions. Based on the country of origin of the investors, following transactions were performed:
- Chinese: 230 transactions
- Indonesian: 114 transactions
- Malaysian: 82 transactions
- American: 57 transactions
ABSD has imposed 15 percent extra tax on foreign investors, however, the interest in on real estate is not fading among the foreign property buyers. What might be the reason for continuing interest?
US dollar is getting strong, and the American investors don’t have to face the ABSD.
Based on the US Singapore Free Trade Agreement (USSFTA), there is no need for the Americans to pay ABSD on the first property they buy in Singapore. The US dollar is strengthening is also a reason for American interest in Singapore is real estate. Another reason is Singapore is low tax. Last but not the least, the real estate market is going through soaring costs in the US and housing in most of the American cities is becoming inflated, which is sending the investors on the lookout for new investment opportunity.
In 2018, Indonesian investors will facing the AEOI
The Automatic Exchange of Information (AEOI) agreement projected for 2018 will implemented a rule where investors from 101 participating countries have to disclose financial information. Singapore is included on the list.
For the wealthy Indonesians, Singapore has always been an attraction because of low tax and confidentiality in the banks. Now that AEOI is expected to pass in 2018, Indonesian investors are worrying that their assets could be disclosed in their home country. It is believed that housing is excluded on this agreement, thus, Indonesian investors are rushing to buy properties in Singapore.
Price in Hong Kong is peaking and the Chinese buyers are moving away
The current property market in Hong Kong is similar to the Singaporean property market in late 2012. Housing prices have skyrocketed, and Hong Kong has implemented 15 per cent additional stamp duties, which is similar to Singapore. These issues have forced Chinese investors to look for new avenue, and Singapore is on high priority. Since China and Singapore have cultural similarities, Chinese investors have landed in Singapore.
Prices for luxury property have fallen
In Q2 of 2016, the prices of luxury properties in Singapore increased by 0.3 percent. However, in Q3 of 2016, it fell by 1.9 in the Core Central Region (CCR), where majority of luxury properties are situated. The drop is almost double in Outside of Central Region (OCR) and the Rest of Central Region (RCR).
Foreign investors understand Singapore geo-positioning, business environment and political conditions. Land is scarce, the country is a major trade hub in Asia, and it is politically stable. The lower prices are making up for the ABSD and the price is declining, thus, it is expected that foreign investors will be back.