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Latest analysis on Singapore property prices

Overview of the latest news on Singapore real estate values

Housing Prices

The private residential property index had its biggest growth in more than six years and rose by 5.41% in Q1 2018 and residential prices rose by 3.79%, the highest since Q2 2010.

The aftermath of the crisis of 2009-2013, did not leave Singapore property market reeling as expected. Property prices, particularly in the luxury segment, have increased considerably, demand is rising and so is construction. Will the Brexit and Trump administration affect the market? That seems highly unlikely in a country considered to be a safe and stable investment destination.

According to figures provided by Jones Lang LaSalle (JLL), providers of real estate and investment management services in the region, some of the major developments had significant increases.

Gramercy Park in Grange Road rose by 9.1%, Martin Modern, off Valley Road by 14,5%, Reflections at Keppel Bay by 5.7% and Interlace by 11.8%. These developments are all in Core Central Region and increases are from Q1 in 2018.

Besides Core Central Region’s overall increase of 6.3%, Outside Central Region also saw property prices rise by 6.7% and Rest of Central Region increased by 2.6%.

Contributing factors

Politically stable, Singapore poses no risks to investors in real estate. The strength of the Singapore dollar encourages foreign investors to seek a safe haven for their money.

As projected by the IMF, Singapore’s GDP is projected at 2.9% for 2019 and inflation remains low at 1.4%. This highly developed, free market economy offers a corruption- free environment and stability. Its unemployment rate is only 2.2% and Singapore relies heavily on foreign labor. The economy relies on industries that provide products such as electronics, medical and chemicals for its strong export market.

Singapore’s Central Bank’s approach – of not controlling the strength of their monetary unit by printing more money, but by keeping it pegged to other currencies – appeals to many investors. The country has a strong financial service sector, developed transportation network and provides a vibrant business environment.

The Singapore government has shown that when it comes to property, it will implement measures to keep the market stable.  The quality of housing is also regulated by various measures imposed by the Urban Development Authority (URA), ensuring that housing and neighborhoods remain livable.

Low lending rates have contributed to pushing up housing prices, despite the efforts of the Monetary Authority and the government of Singapore.

Rental yields

Several laws have been revised that entail the rights of foreigners to own property in Singapore over the years. Since 2005, foreigners can buy apartments in buildings that are less than six stories without prior approval. Foreigners cannot purchase vacant land and landed properties without permission from the Singapore Land Authority. Condominiums can be purchased without any restrictions by foreigners. Foreign exchange restrictions are minimal and non-residents can obtain loans for up to 80% of the property value, in Singapore Dollars at an interest rate that remains quite low.

Condos in Singapore, at an average of $13,500 per m2, are expensive, suppressing the gross rental yields to approximately 2.5%. Typical of most property markets, the yields are a little higher on smaller apartments, but most investors do not buy property for their yields.

Taxes and costs

Taxes are high in Singapore. Non-residents are taxed on net rental income at 22%. Deductions from the gross rental income include property tax, insurance, maintenance and repairs.

Residents are taxed progressively at rates ranging from 25% to 22%.

A flat rate of 10% is levied as a property tax on all properties and foreigners pay a 10% surcharge.

There is no capital gains tax and estate duties were abolished in 2008.

The procedure for registering a property in Singapore will be complete within six days. The complete buying costs can be anything from 13.45% to 34.45%. Stamp duties of 1%to 3% are paid by the buyer.

In order to find a property in Singapore, buyers need only go to one real estate agent, since all properties are on one database.

The Control of Rent (Abolition) Act of 2001 protects the rights of the landlord. The rent and rent increases can be determined by both parties, but the tenant has to provide one month security deposit for every year of the agreed lease.

Disputes are resolved through mediation, offered by groups such as the Consumer Association of Singapore and Singapore Mediation Center

Conclusion

When the Brexit vote passed, by 52% in 2016, the global markets went into shock. The fear of London losing its safe –haven status drove property investors to the safety of Singapore and to a lesser extent other Asian markets.

A bit later in that year, new developments appeared from the US with Trump’s election. His protectionist stance soon caused the US-China trade war creating uncertainty in all global markets; causing even more investors to flock to the Singaporean property market.

 

As soon as official data showed that home prices had risen to the highest point in four years, with sales to non-residents up by 44.4%, the government decided to take instant measures to protect the market.

In July 2018 the cooling measures were put into place with an added buyer’s stamp duty and tightening of loan-to-value limits, on residential property prices.

The Monetary Authority of Singapore tightened its monetary policy for the first time in six years. This policy will ensure a modest and gradual appreciation of the Singapore dollar nominal effective exchange rate, bringing medium-term price stability. The appreciation in the Singapore dollar has in part also been due to US dollar weakness and the like depreciation of other regional currencies against the Singapore dollar.

Investors who flee bearish and volatile markets and investments need to weigh the risks before investing in property. Not all properties give maximum returns, but then again parking your money in a safe destination might be better than high returns in these extraordinary times.

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Rita Monteiro

Rita – After graduating from NYU with a master degree in history, She was also a columnist for many local newspapers. Rita mostly covers business and Technology topics, but at times loves to write about reviews as well.
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