Back with a roar
Asian property investment is turning positive after a muted first quarter – and nowhere more so than in the Lion City. Andre Cooray reports
Singapore is far from immune to the effects of the current global economic crisis but it appears that things are picking up, especially since the island city-state ranks second among the top five Asia Pacific cities for property investment in The Urban Land Institute’s and PricewaterhouseCoopers’ 2009 regional report. With a growing strategic position as a commercial hub, an increasing population, and acceleration of government infrastructure projects that includes a S$40 million makeover of Orchard Road (its main shopping belt), Singapore, it seems, has the resilience and ability to make a full and speedy recovery.
“Singapore’s real estate presents long-term value despite the current economic downturn. Over the years, Singapore has successfully positioned itself as an attractive financial, business, arts and cultural hub, a magnet for multinational corporations setting up their offices in Asia. The Singapore government adopts a pro-business fiscal policy. It has built up a substantial cash reserve, which it is now using to support infrastructure development that will in turn create jobs and attract international investment in the medium to long term,” says Johnny Yu, director for residential project marketing at CB Richard Ellis (CBRE).
According to Yu, these growth engines have helped fuel the huge increase in property values in recent years. The market peaked in the second quarter of 2008 when residential prices rose 58 percent since the lows of early 2004. Strong interest has been evident in the luxury market, especially from foreign investors, encouraged by Singapore’s non-restrictive system. Foreigners are eligible to purchase any non-landed properties (any unit in an approved condominium project), however landed home purchases (detached, semi-detached, terrace and townhouses) are subject to approval. In addition, Singapore has no capital gains tax.
“The proportion of foreigners who invested in residential properties grew steadily in the last three years, many of whom have benefited from the rise in capital values,” Yu adds.
There’s no denying that prices have been falling of late — Singapore’s Urban Redevelopment Authority recorded a 13.8 percent fall in residential prices for the first quarter of 2009, after a 6.1 percent drop in the last quarter of 2008 — and Juliet Stannard, the director of Cityprop Property Management Pte Ltd, for one, believes that now is a great time to invest because properties are almost, if not already, down to 2007 prices.
Stannard also points out that because Singapore is still a relatively young market, investment opportunities definitely exist, especially outside the prime districts where new MRT (Singapore’s MTR equivalent) stations are scheduled to open in 2010.
Investors are in fact advised to get in quick before the market really picks up. “There has been a substantial increase in the number of transactions over the last four to six weeks. There is a tremendous amount of pent up demand from many clients who are keen to either buy into the Singapore property market for the first time and feel they missed out before the upturn, or people who are re-investing. Subsequently, the market is quite busy with a lot of people offering on properties, who have been taking a wait-and-see attitude over the past 18 months or so,” says Stannard.
By way of a market overview, the average selling price at Waterfront Waves in Bedok, located in Singapore’s east, has reduced from its January 2008 launch price of HK$4,218 to HK$3,163 per square foot. Unit prices at Woodsville 28 in Singapore’s north-central suburb of Potong Pasir, have come down from HK$4,745 to HK$3,954 per square foot since July 2008. In Kovan Residences in Kovan, north of the city, the July 2008 launch prices have reduced from HK$4,640 to HK$3,945 per square foot.
Reduced rates have stimulated home sales in these areas, proving that underlying demand remains healthy and that liquidity is returning to the market. However, sales in the higher-end range are still relatively low. Shoe-box sized apartments on the city’s fringe are the most popular among cautious buyers. Those looking for a home for under HK$3.1 million are considering projects like Nova 88 located in Balestier (north of Orchard Road) and the Mercury in River Valley (within the central area). Here units from 340 square feet to 750 square feet are available, priced between HK$4,746 and HK$6,328 per square foot.
CBRE notes that since March this year, larger family-sized homes have also been selling well. At developments located in Chao Chu Kang, a suburb in the west, such as Mi Casa, 1,300 square-foot apartments are selling for HK$3,295 per square foot. At The Arte @ Thompson in the same area, 1,873 square-foot apartments are selling for around HK$4,640 per square foot.
Stannard has noticed keen interest from British, European, Chinese and Indonesian investors. Buying a property in Singapore combined with investing in local companies can speed up the process for those wishing to become permanent residents, which is an attractive option for many people. That said, there are strict financial requirements and investors need to prove their ability to fund investments.
“The rental market has come down quite substantially over the last year or so and has now stabilised. Some areas in the market have actually become quite tight due to an increase in people coming into Singapore over the last month,” says Stannard, who attributes this to the fact that expats relocating to Singapore are looking to have their housing in place before the new school year starts in August.
“I’m optimistic that Singapore will remain an attractive place for companies to post their employees and families,” Stannard adds. Should you be buying to let, prospects therefore look excellent in the long term.
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