Thursday, May 26, 2011

How to contain the effects of foreign buying of property....

Yesterday, a study by DTZ research shows that the % of private property sold to foreigners (non-PR)  has reached a record high of 16% up from 15% in the last quarter. One of the potential reasons I mentioned in a previous post for rising prices is the buying by foreigner investors and speculators. The DTZ  shows that a higher of % foreign buying is found in higher end properties costing more than $1.5M and for lower end property below $500K the % of Singaporean buyers  (citizens) actually rose from 72% to 80%. Singaporean buyers fell from 70% to 67% of all buyers.

Basically, the data shows Singaporeans are increasingly being squeezed down (to the lower end) and squeezed out of the property market. For land scarce Singapore with the highest income inequality among developed countries, how should we view property? Is it an investment like Singapore stocks which we should allow foreign investors to enter market?
Many countries have curbs on foreign buying even when the country has a lot more land per capita compared with Singapore. While the govt restrict foreigners from buying HDB, the impact of foreigners buying private property has caused middle class Singaporeans to be squeezed out and this has pushed up demand for resale flats. Purchase of landed property used to be restricted and foreigners had to apply for permits which were not granted unless there is good reason. However, in recent years, such permits are granted routinely.

There are several things govt can do about this:

1. Restrict foreign buying. Foreigners can always rent if they need a place to stay. It does not make sense for land scarce Singapore to allow foreigners to use our housing market as a form of investment.

2. Require foreigners to sell to Singaporeans. Here is a rule that is implemented in Australia which has much more land than Singapore- allow foreigners to buy but they have to sell to locals.

3. Impose higher levies/taxes on foreigners buying Singapore property.

4. Limit the % of new property that can be sold to foreigners.

While there are ways around these rules such as appointing a local proxy to get around them like what some Singaporeans do in Indonesia, putting them in place with deter most foreign investors.
16% of private home buyers in S'pore in Q1 are foreigners: DTZ
25 May 2011 0047 hrs (SST)

SINGAPORE : Foreign buyers accounted for 16 per cent of private home
purchases in Singapore in the first quarter of this year, setting a new record
high, according to real estate consultant DTZ Research.

The previous high of 15 per cent was recorded in the fourth quarter of 2007.

DTZ defines foreign buyers as non-Singaporeans and non-permanent residents.

Singaporeans' share of private property purchases fell to 67 per cent in
the first quarter, from 70 per cent in the previous three months.

The proportion of mainland Chinese among non-Singaporean buyers - comprising
foreigners and PRs - hit a new record high of 24 per cent in the first quarter
of 2011.

It is the first quarter that Chinese nationals are the top
foreign purchasers of residential properties in Singapore.

"The residential market appears to have taken the January 2011 cooling measures in
its stride," said Ms Chua Chor Hoon, head of DTZ South East Asia Research.

"However, local concerns about high housing prices and the influx of
foreigners that were magnified during the recent General Election will be a
catalyst for the review of immigration and housing policies, which could dampen
demand in the residential market in the coming months," she added.

According to DTZ, small units continue to be popular among home buyers,
especially the HDB upgraders.

The proportion of buyers with HDB
addresses who bought units below 1,000 square feet increased 5 per cent in Q1
2011, compared with a 2 per cent increase among buyers with private addresses.

DTZ's analysis also revealed that a higher proportion of foreigners
bought into the high-end market during the quarter.

For transactions
costing S$1.5 million and above, the proportion of purchases made by foreigners
increased the most - from 17 per cent to 21 per cent.

For purchases
below S$500,000, the proportion of transactions made by Singaporeans was 80 per
cent, up from 72 per cent a quarter earlier.

This reflected the smaller
budget among Singaporean buyers. "At the lower end of the price scale, locals
are the main drivers of demand," said DTZ.



Amused said...

Here is a simple solution -

Limit the population size to 5 million. If you have to send FTs home to stay under the limit, do it!

It will not only restrain property prices, it will reduce stress in a number of areas (congestions, medical care, wages)

Anonymous said...

Artificially raising our population is inevitable. Without that critical number, a lot of jobs, and businesses, will be wiped out.

I think without looking at all relevant data, it is hard to pin point the best solution. Not wise to embark on extreme measures.

Anonymous said...

Living in Serangoon Garden, you can see a gradual demographic change. My next door neighbour sold his semi-d to a French/Aussie couple; opp neighbour sold it to an Amex family. Mind you...sold!!! not rent. Up the hill, couple of units sold to India/Indian and China/chinese.
So kapo-kapo, ask my neighbours and readup SLA site;
- at least one of the buyer need to be a PR
- AIP (approve in principle) valid for 6mths
- start hunting for units, paid deposit then submit LUD
- LUD approve (land dealing approval), then can buy
Well, it seems now; its free for all....
Now, my hse is undergoing renovation and so rented an apt unit and holy-shark, almost all the units that I viewed were all owned by foreigners. The current unit that I am renting, the owners are PR India/Indians, who are not even working in nor living in Singapore.
They are not contributing their talents at all, they are capitalising on our very own govt. lax policy.
Our govt shd and must change their policy before our scarce land are in the hands of foreigners !!!

Anonymous said...

Nah. Don't think Government will do anything about it.

That way, they can create a bubble, inflate property price, (of course, make a killing in the process. Otherwise, how are we suppose to pay the astronomical amount for our Minister's salary?), then burst the bubble, create a crisis and hold an election. Don't forget that they then can attribute the economic downfall on global situation and ask the people to give them a strong mandate, based on fear.

Anonymous said...

I guess it is simply money laundering after our IRs opened. The same thing happened in Macau. PRCs are paying cash for properties. Didn't the authorities see this coming?

Anonymous said...

The Singapore landed property is still below market value as compared to other property including HDBs. The reason is that the government has actually valued all the land on Singapore island at $1,000 per sq ft. The actual built-up area (even for high-rise apartments including HDBs) actually valued more than this land value of $1,000 per sq ft. Most landed properties are sold way below this benchmarked land value. That is why many foreigners see it better to buy landed property in Singapore since it is still below value and there is potential to make profit when they leave the country in few years time. The property price will stay if not go up in next few years for increased population to 6.5 or even 7.5 millions.

Anonymous said...

Now we know why the party serve the foreigners and not Singaporean. Why spent so much money on defence when there is nothing for Singaporean to defend ?

Anonymous said...

I would go further. Properties should not be treated as investments at all in land scarce Singapore.

Singaporean should only own 1 property at a time for a roof over their head.

Non-Singaporeans should not profit excessively from owning properties in Singapore. I propose a capital gain tax of 50%. They are still welcome to buy properties for the purpose of staying. But when they leave, the capital gain tax will prevent them from profiting excessively as a result of land scarce situation.

Similarly, for Singaporeans who own more than 1 properties (public or private) concurrently for more than 6 months, a capital gain tax of 50% should be imposed when they sell their 2nd property.

The 6 months grace period is to allow those who upgrade or downgrade time to dispose their current property without penalty.

red eyed... said...

You notice that the sellers are not grumbling?

Be it east coast, serangoon gdns or binjai park.. no one there is grumbling.. in fact there is more vehicular traffic in these places, almost the whole day & night.. each individual has a car.. not toyota vios but mebz300, lexus500, audi6, volvo4, all saloon or suvs or both!

I just cannot understand how in the world do they get the $$? I cant even make 5K a month!

am I missing something here?

Anonymous said...

Red Eyed.

There are plenty of opportunity to make money in Singapore besides being a politician or vip-related person. It is sad that you cannot even make that $5K a month.

My friend told me that a German came to Singapore because he believed he can make more money in Singapore. In fact, most foreigners make tons of money in Singapore due to pro-foreigner policies. Another friend was squeezed out from one university that prefers to give tenure to foreigners like Chinese professor who cannot even speak proper English.

You see. How sad are you not able to make money on this island? You might as well disappear from this island.

Anonymous said...

Singapore never belong to the local in the first place. The Old owner only gave the local free reign of this land.
Now, the Local wants to sell it to others and if aliens are willing to pay for the asked price, they should be entitle to do so mah. Nobody forced anybody to sell or to buy, right?
The Local sells and the Local complains, where got logic/meaning??/

Anonymous said...

Very good pro-Singaporean idea for once. Foreigners can only see to true blue Singaporeans. I like it.

Anonymous said...

We should never trust foreigners and sell our national assets in masses to them. If one day, this guys were to mass sell and dump Singapore properties at dirt cheap rate and withdrawl from asia. it will send the whole property market collapsing including our HDB flat.

Anonymous said...

No facts and figures, you guys can only make wild assumptions.

Anonymous said...

Selling Singapore away by the sq. ft is one of the easy way out for the PAP to 'boost GDP'. This keeps up, Singaporeans will one day have to rent from foreigner owned properties! And Singaporeans are expected to protect these foreign owned property?

Anonymous said...


Anonymous said...

Can someone enlighten me.

How are investment funds based a in Singapore classified. If such funds buy 20 units of private property on behalf of their wealthy customers all over the world, is this purchased classified as Singapore resident purchase? If that is the case, then foreign participation is much higher than the the data implies.

sky said...

I agree, the government should place restrictions on foreigners buying private properties. Many of these foreigners, who buy the property, enjoy the capital appreciation. And when they eventually leave Singapore, they take with them their capital gains out of the country?! Is the government aware of this?!

I think a healthy regulated rental market is is the sustainable way to go for Singapore. Not many Singaporeans are ready to afford homeownership. The government should consider policies like the housing voucher systems as practice in the US, which subsidize rental housing. I think this can be applied to our private housing market.

This way Singaporeans can still fulfill their home aspirations like living in the estate that they want at a reasonable costs. This will also ease the demand in the hot private residential market, as it is now.

Euphemia said...

It can't really work, I suppose like this.