Singaporeans are adamant about foreigners buying Singapore homes
Before, the small number of foreigners who bought residential properties in this country did not seem to be a threat. What happened?
The doubling of Additional Buyers Stamp Duty for foreign purchasers of residential properties in Singapore from 30% to 60% by end-April 2023 has effectively reduced foreign buyer demand. Was the number of foreign buyers flooding the private residential market so high that it threw the market out of balance and marginalised the housing ambitions for Singaporeans?
The government said the increase in ABSD rates was a preventative measure when it announced them in April 2023. If you look at recent foreign buyer volumes, it may be possible to determine whether or not this group was able to make a significant impact.
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Number of foreigners who bought non-landed homes from Q1 2018 through Q4 2023
Foreigners purchased 1,216 units before the pandemic in 2018, and 1,001 units afterward, representing 6,3% and 6%, respectively, of non-landed private homes islandwide. In the two years prior to the Covid-19 epidemic, foreigners bought an average of 277 non-landed homes per quarter or 1,109 units per year.
The government did not take any measures to reduce the demand of this group of buyers, even though the number of foreigners in the country reached 300 on several occasions (between the first and third quarters of 2018 as well as Q3 of 2019).
Even in the darkest days of the pandemic, between Q1 2020 to the fourth quarter 2021, this quarterly average was stable at 231 units. Transactions by foreigners were mostly hindered by travel restrictions.
In the three and a half years between Q4 2019, and Q1 20,23, including the pandemic, and the recovery that followed, the number of foreign sales per quarter never exceeded 300, and they accounted for 3.1 to 69% of non-landed transactions in each quarter.
From the beginning of the pandemic until just before the imposition 60 percent ABSD for foreign buyers, the average percentage of non-landed transactions by foreigners was 4.7 percent.
The proportion of foreign buyers in the Core Central Region, where luxury non-landed properties are located, is usually higher. It averages 11.7 percent quarterly between Q4 2019 and Q1 2023 or ranges from 7.8 to 17 per cent.
The greater proportion of foreigners purchasing in the CCR comes from high-net worth individuals and families who traditionally view Singapore as an ideal destination for investment homes, both to preserve capital and increase it.
Singapore is a popular wealth hub for foreigners to invest in residential property because of the government’s proactive policies. These include policies that encourage foreign investment, improve infrastructure and regulate the business and social environment so that wealth has a secure and stable home.
From the years before the pandemic in 2018 to the present, the number foreign buyers in CCR has remained below 200 units every quarter. The highest was 162 units during Q1 2023.
Before and after the pandemic, the ultra-rich were a small minority. It was therefore surprising that alarms were suddenly raised after the pandemic when no symptoms of a shift in trends could be seen.
Headlines not statistics
The news is full of stories about foreign buyers who have purchased multiple properties at new prices benchmarks.
These anecdotal transactions do not give a complete picture of the influence that foreign buyers have on the residential market.
According to the CCR non-landed index, prices declined by 0.4% in 2020. They rose by a modest 3.8% in 2021, 4.8% in 2022, and 1.9% in 2023.
In these years, the movements of the indexes of the Rest of Central Region and Outside Central Region were far behind those of the overall price index. This was a period when the price increase in Singapore was mainly driven by the demand of homebuyers.
The CCR participation of foreign buyers has decreased from 50 on average per month between January 2023 and May 2023 to 13 on average between June 2023 and December 2023. In the months following May, foreigners from countries with free trade agreements (FTAs), who pay the same ABSD rate as Singaporeans, made up the majority of numbers.
The CCR is not a place where foreigners from FTA nations are increasing their participation, but buyers from FTA nations continue to show interest in this market (albeit at a lower level) and look here for opportunities instead of other wealth hubs.
Singapore is an investment hub and a place of wealth. The reputation of stability and safety in Singapore was enhanced when the government managed to keep the economy afloat, and the citizens safe from the worst effects of the pandemic.
According to the attitudes survey conducted by Knight Frank for its Wealth Report, 2022 25 percent of regionally mobile Asians chose Singapore as their top choice when it comes to buying a home outside their country. The percentage remained the same in 2023, at 26%. According to the Monetary Authority of Singapore, the number of Singaporean family offices grew to 1,100 in 2022 from 50 at the end of 2018. This is a testament to the attraction of the city state.
When faced with an increased ABSD, foreign investors who were attracted by the wealth proposition of Singapore may now look to other locations in the world and the region.
Should the government reduce the ABSD for foreign buyers as the transaction volume on the market has dwindled and foreign buyer activity in the CCR is almost at a standstill? The government should consider reducing the ABSD rate for foreign buyers, especially now that the supply has caught up to the unprecedented domestic demand that was sparked by the pandemic.
Concessions may be subject to some form of restriction.
As an example, the ABSD rate could be reduced only for houses in the CCR and tickets exceeding S$5,000,000, which are usually reserved for the most wealthy households.
The ABSD rate for foreign buyers does not need to return to 30 percent as it was before April 2023.
Even if there are qualifying conditions, any reduction could be a gesture of goodwill that signals that Singapore is still open to investment and wealth from around the globe, and that we welcome those who have the resources and talent to grow with us.
