Why Singapore is Still a Top Choice for Foreign Property Investors during Covid19

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Alibaba, Shun Tak Holdings, ByteDance and Tencent.

What do these top companies have in common?

They are some of the largest organisations which have revealed plans to expand and set up offices in Singapore during the Covid19 pandemic.

With the global pandemic devastating economies worldwide, Singapore is not spared as well. We are receding into a recession since the global financial crisis and the economy was reported to have contracted by approximately 13% and 7% in the 2nd and 3rd quarter respectively year-on-year.

You may now ask, why is Singapore still a top choice for property investors during Covid19 as seen by the demand from these conglomerates? Here are 3 key reasons why:

1. Global Technology Boost due to Covid19

With global lockdowns and remote working becoming the norm during the Covid19 pandemic, the technology industry has benefited greatly from such major shifts in working habits. According to the Economic Development Board (EDB), Singapore is home to 59% of regional headquarters of international tech giants such as ByteDance, Alibaba and Tencent. These conglomerates have also announced plans to expand their presence in Singapore,giving the local property market a huge boost this year.

As a result of great demand from the market and good performance of stock prices, managers from these technology companies are reaping in healthy bonuses and substantial income. Singapore is an attractive safe haven for these high-flying financiers as the rich gets richer during this period. They want a place to park their funds for the long-term and the local real estate market offers many high-priced opportunities for these overseas buyers to do so.

As a general rule of thumb, not all residential real estate are up for grabs for foreign investors though. Foreign buyers are expected to fork out additional buyers stamp duty (ABSD) of 25 % on the property purchased, with the exception of citizens of Switzerland, Norway, Iceland,Liechtenstein as well as the United States. Further, non Singaporean citizens as well as non permanent residents can purchase most private condominiums as well as landed properties in Sentosa. Permanent Residents have more opportunities to buy landed properties in other districts but they must show evidence of economic contribution to the city-state.
If you have roughly $19 million, you can purchase a 4 bedroom penthouse suite on Wallich St in the Central Business District– the same building as the high-end apartment that Sir James Dyson sold this year. For a lower budget of close to $2 million, you can consider living on Sentosa island with a 2 bedroom private condominium apartment.

2. Singapore’s status as a financial safe haven cemented with a strong containment of the coronavirus

With very few community cases reported over the past months and low fatality rates from Covid19, foreign investors are once again reassured of the stability of putting their money in the property market in Singapore.

According to Collier Research, property investment sales are projected to grow by approximately 5 % per annum from 2019 to 2024 in spite of a projected 24% dip year-on-year due to the pandemic.In particular, residential real estate sales are forecasted to outperform other sectors as it has totalled 51% of the overall investment volume in the 1st quarter this year. Generally, residential sales volume has increased by 68.5 % quarter-on-quarter and there has been consistent demand for Good Class Bungalow (GCB), landed properties as well as new condominium launches.

As for the commercial sector, many notable foreign companies such as Alibaba and Shun Tak holdings have expanded their stakes in office buildings such as AXA tower as well as TripleOne Somerset respectively. Other sovereign wealth and equity funds which have invested heavily in Singapore’s property market over the years include Qatar Investment Authority’s stake in Asia Square Tower 1, Alliance Real Estate/Gaw Capital’s acquisition of Duo Tower and Korea’s National Pension Service’s investment in Fraser Tower. The more recent foreign investment came from Australia’s LendLease, where the company bidded for land to redevelop Paya Lebar into a mixed-used business hub.

The entry of these foreign investors during the pandemic period echoed the sentiment that Singapore remains widely recognised as one of the most stable markets in the entire Asia region, buoyed by a strong Singapore Dollar and stable government.

3. Expats from Hongkong are drawn to Singapore

With the passing of the national security law in Hongkong, international companies and foreign investors are seeing Singapore as a more attractive alternative to do business in.

Even though Singapore’s stamp duty fees can go up to 25%, this has not deterred affluent foreign buyers to take interest in our local property market. One notable example would be the British entrepreneur, Sir James Dyson. He still owns a luxury home in the luxurious Botanic Gardens district while selling off his multi-million penthouse suite that he purchased last year.

Despite the circuit breaker period in the earlier part of the year, overall sales of high-end properties surpassed that of 2019; this sends a strong signal that Singapore is in a very strong position in terms of the real estate sector.
In the core central region where most prestigious properties are located, Urban Redevelopment Authority(URA) reported that there were more than 2000 transactions completed for the first 9 months. This volume is even higher than the 1962 transactions over the same period last year. Of which, foreign buyers purchased 260 units, a healthy number considering the challenging conditions this year with the tightened border restrictions. 75 % of international real estate buyers were also from Hongkong or China as more expats and their companies are considering moving their headquarters to Singapore gradually.

Conclusion

Being predictable need not be boring. In fact, predictability and stability are important factors foreign investors consider when they are thinking about where to park their money for the long term. This is especially so when investors take into account up and down cycles. Singapore’s real estate market ranks very highly amongst foreign buyers as stabilisers in their investment portfolios, especially so in a global Covid19 pandemic.

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