June 2017

Singapore residential property market - hotspots for foreign purchasers

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Foreigners are expected to make a comeback to Singapore’s residential property market after shying away from it since 2012 following the imposition of the additional buyer’s stamp duty. In the first four months of 2017, the proportion of foreign buyers1 in the private residential market has increased slightly to 7.0% from 6.7% in 2016. Although this is far cry from the 17.5% seen in 2011, it is, nevertheless, an encouraging level of transaction among foreigners.

The recent easing of cooling measures seen as a signal that the unwinding of measures has begun should continue to stoke confidence and boost sentiment. Coupled with the likely bottoming of prices, more foreign investors are expected to return to the Singapore residential shore to capitalize on the potential price upside.

This paper seeks to provide guidance on foreigners’ purchasing hot spots by looking at where they were buying in 2016 and in the first four months of 2017.

1 Foreign buyers are individuals who are not Singapore citizens or Singapore permanent residents.

Introduction

Proportion of Foreign Buyers

0%

20%

17.5%

7.0%

0

0.2

0.4

0.6

0.8

1

1.2

2%

4%

6%

8%

10%

12%

14%

16%

18%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (Jan-Apr)

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Market overview

The Singapore residential property market is showing signs of bottoming. Non-landed property prices declined 2.6% y-o-y in 2016, an improvement from the 3.5% and 3.6% y-o-y decreases in 2014 and 2015, respectively. Prices of properties in the Core Central Region (CCR) increased in three out of four quarters in 2016, after 11 continuous quarters of decline between 2Q13 and 4Q15.

In 2016 annual sales volume rose 16% y-o-y, an improvement from the 10% y-o-y increase in 2015 and the 40-44% y-o-y decrease in 2013-2014. The recent easing of the Seller’s Stamp Duty and the Total Debt Servicing Ratio are positive developments which will enhance the improvements that we have already seen in the market.

Foreign buyers used to account for 17.5% of all private residential purchases in Singapore in 2011. However, foreign purchases declined dramatically to 6.5% in 2012 after the introduction of the additional buyer’s stamp duty (ABSD) of 10% on foreign purchases in December 2011. As prices continued to increase in 2012 and 2013, the

Source: Urban Redevelopment Authority (URA) Realis/JLL Research

Figure 1 Foreign Buyers in the Private Residential Market

In spite of the ABSD remaining in place, foreigners continue to invest in Singapore due to

its strong fundamentals, which promise prospects of long-term capital appreciation.

“ ”proportion of foreign buyers rose to 8.7% in 2013 and 9.2%

in 2014, before softening in 2015 and 2016 to 6.6% and 6.7%, respectively. An upward revision of the ABSD payable by foreigners to 15% contributed to the moderation in their purchases. In spite of the ABSD remaining in place, foreigners continue to invest in Singapore due to its strong fundamentals, which promise prospects of long-term capital appreciation.

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2016/ 2017 (Jan-Apr) Foreigners’ hotspots

There were 1,610 private home purchases made by foreigners between January 2016 and April 2017. Figure 2 shows the foreign purchasers’ hot spots.

Out of the 1,610 purchases made by foreigners in 2016/ 2017 (Jan-Apr), 60% were located in the Central Region, with transactions concentrating in Districts 9 and 10. Other hotspots include projects located along the Mass Rapid Transit (MRT) lines, and the Jurong Lake District.

Source: MapIT, esri, REALIS, JLL Research

Figure 2 Heat Map of Singapore Residential Properties Purchased by Foreigners in 2016/ 2017 (Jan-Apr)

Out of the 1,610 purchases made by foreigners in

2016/ 2017 (Jan-Apr), 60% were located in the Central Region, with transactions

concentrating in Districts 9 and 10. Other hotspots include

projects located along the Mass Rapid Transit (MRT) lines, and the Jurong Lake District.

High Low

“

”

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Figure 3 : Top 15 Projects with the Highest Number of Units Purchased by Foreigners from Jan 16 to Apr 17

Project Name Number of Foreign Purchases from Jan 16 - Apr 17

Average Unit Price from Jan 16 - Apr 17 (SGD per sq ft)

Postal District

Cairnhill Nine 82 2,488 9

OUE Twin Peaks 65 2,681 9

Principal Garden 48 1,635 3

Sophia Hills 36 1,943 9

Seaside Residences 34 1,738 15

Kingsford . Hillview Peak 33 1,273 23

The Trilinq 32 1,342 5

The Glades 26 1,421 16

Commonwealth Towers 25 1,685 3

Gramercy Park 25 2,668 10

Lake Grande 25 1,356 22

Lakeville 25 1,245 22

Sims Urban Oasis 25 1,401 14

Leedon Residence 24 2,126 10

D’Leedon 23 1,509 10

Source: REALIS, JLL Research

Hotspot #1: prime residential districts

The top selling projects to foreigners in this area from Jan 16 - Apr 17 are :

• Cairnhill Nine (82 foreign purchases)• OUE Twin Peaks (65 foreign purchases)• Principal Garden1 (48 foreign purchases)• Sophia Hills (36 foreign purchases)• Gramercy Park (25 foreign purchases)• Leedon Residence (24 foreign purchases), and • D’Leedon (23 foreign purchases).

This locality has traditionally been popular with foreign purchasers due to:

Exclusivity and PrestigeThe prime districts are home to Singapore’s most expensive apartments and houses and is the favoured place of residence for the rich and well-heeled.

Strategic LocationThey are close to the famous Orchard shopping belt of Singapore, where renowned retail brands aspire to have a presence. Other amenities are also abundant in the vicinity. The prime districts are also near to the Central Business District (CBD), within a ten-minute drive or four MRT stops to the CBD core.

Popular Leasing Destination for ExpatriatesFor the reasons above, this sub-market is a traditionally popular leasing destination for expatriates. In 2016, district 9 and 10 had the highest number of leasing contracts, contributing 20% in total to the island-wide leasing volume.

Beyond these, the attractive prices, discounts and incentives offered by developers for many of the projects in these districts have also drawn foreigners into this market.

Early in 2016, Cairnhill Nine surprised the market with relatively low launch prices of about SGD 2,500 per sq ft compared to price levels above SGD 3,000 per sq ft in the immediate surroundings when the market was buoyant. Cairnhill Nine achieved a take-up rate of 89% or 177 units sold during the first month of launch. This was significant since there were no non-landed projects in the Central Region that reached such a high take-up in 2015 and 2016.

The success of Cairnhill Nine revived pent-up demand in the prime districts. Riding on the momentum, developers of other projects in the sub-market offered discounts and various incentive schemes, such as deferred payment schemes and ABSD absorption, to move sales, as many of them are under pressure to meet Qualifying Certificate (QC2) and ABSD3 remission claw-back deadlines. Attractive price levels, incentives and discounts were major contributors to bringing more foreign buyers back to the Singapore prime residential market.

1. Principal Garden is at the border between district 10 and district 3 2. QC extension fees are chargeable when non-Singaporean developers fail to sell all units in their residential developments within two years from the developments’ completion date. 3. Developers need to pay ABSD if they are unable to build and sell all units in their development within five years from the date of land acquisition.

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Hotspot #2: along MRT lines

Beyond the prime districts, hotspots for foreign buyers are mainly located along MRT lines, which provide travel convenience. If investors intend to lease out the units, the proximity to public transportation, especially MRT stations, is a crucial criterion for them to attract tenants, as most tenants do not own private vehicles.

Newly developed condominiums and projects under construction, which are close to MRT stations, attracted many foreign buyers in 2016/2017. The most popular ones are:

• Seaside Residences (34 foreign purchases)• Kingsford . Hillview Peak (33 foreign purchases)• The Trilinq (32 foreign purchases), and• The Glades (26 foreign purchases)Seaside Residences, which was newly launched in April 2017, quickly moved more than 400 units within the first

month of launch, among which 34 were sold to foreigners. The project is located within a short distance from the future Siglap MRT station. It boasts of sea views along the east coast and is near shopping, eating and recreational amenities. The travel convenience and the amenities around MRT stations are major pull factors for foreign buyers purchasing homes along the MRT lines.

Beyond the prime districts, hotspots for foreign buyers

are mainly located along MRT lines, which provide travel

convenience.

“ ”

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Hotspot #3: the future second CBD - Jurong Lake District

To the West, Lake Grande had a successful launch in 2016 with a take-up rate of 93% in the first month of launch. Among all buyers in 2016/ 2017, 25 were foreigners.

Next to this development, Lakeville, a newly completed condominium, also found 25 foreign buyers for its units.

Older projects in the vicinity, such as The Lakefront Residences, The Lakeshore, Lakeholmz, The Mayfair, Parc Vista and Parc Oasis, also had units sold to foreigners on the secondary market.

Jurong Lake district is positioned as the future second CBD in Singapore, the first smart city in the country and the terminus of the future High-Speed Rail connecting Kuala Lumpur and Singapore. With all the future investment and infrastructure, more businesses are expected to be drawn to this area. This will in turn increase the housing demand to support the upcoming employment hub. Potential price appreciation would be the key factor attracting buyers to this region.

Jurong Lake district is positioned as the future second

CBD in Singapore, the first smart city in the country and

the terminus of the future High-Speed Rail connecting Kuala

Lumpur and Singapore.

“ ”

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Conclusion

Generally, foreigners must feel confident that the property they are purchasing is a good investment.

A significant portion of the properties purchased by foreign investors was located in prime residential districts, transacted at substantial discounts compared to the peak in 2013. Anticipating that the market is close to the bottom, they foresee an upside in prices and capital gains when the market recovers.

For properties outside CCR, proximity to MRT stations, which ensures convenience and competitive advantage in leasing, is a key factor for many foreign buyers. Properties in growth areas such as Jurong Lake district are also appealing to foreign investors due to their potential price appreciation in the future.

As sentiments remain positive and the market close to the bottom, more foreign investors are expected to return

to the Singapore residential market to capitalize on the potential price upside. In the first four months of 2017, the proportion of foreign buyers in the private residential market has increased slightly to 7.0% from 6.7% in 2016. The recent easing of cooling measures is also seen as a signal that the unwinding of measures has begun and a market recovery may be expected.

“ ”

As sentiments remain positive and the market close to the

bottom, more foreign investors are expected to return to the Singapore residential market to capitalize on

the potential price upside.

Ong Teck Hui

National Director Research & Consultancy JLL Singapore

Hannah PhamSenior Research Analyst JLL Singapore

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Authors

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