The latest cooling measures in Singapore took effect on 16 December 2021. A lot has happened since then. Singapore saw decade-high inflation. The property tax is set to rise nearly twice as much as today by 2024. The world saw the devastating effect of the war on oil prices, which lead to commodities price spikes.
How has this affected the housing market in Singapore?
More importantly, who was most affected?
I pulled out Singapore property transaction data from 1 Dec 2021 to 1 Apr 2022 to find out just that!
On 1 December 2021, there were no cooling measures. But since then, the effect of cooling measures has influenced buyers’ sentiments. What we will explore here is how buyers’ sentiments have been influenced? Which segments have been affected the most and why?
- Impact on total ownership due to the latest cooling measures.
- Which segment did the Singaporeans find most interesting despite the cooling measures?
- Which segment did the foreigners find most interesting despite the cooling measures?
- Who is making the lion share of foreign investment in Singapore property?
- Why do foreigners find Singapore properties so attractive?
- Which price range of properties are most impacted by the cooling measures?
- Want to know how to optimise your chance of a successful investment?
Impact on total ownership due to the latest cooling measures.
The graph below gives us a peek at the proportion of ownership of Singapore properties by Singaporeans and foreigners. In general, Singaporeans bought more properties than foreigners.
But if we reflect on the timeline between 1 Dec 2021 to 1 Apr 2022, we can see that within this time, Singaporeans’ transactions have gradually dropped from 82.39% to 77.97%. On the other hand, foreign transactions increased from 17.49% to 22.03%.
That means while Singaporeans’ transactions dropped by 4.42%, foreigners increased by 4.54%, leaving a striking difference of 8.96% between the 2 groups. In other other words, the cooling measures discouraged locals to buy further properties whereas it motivated foreigners to invest more in Singapore real estate.
Which segment did the Singaporeans find most interesting despite the cooling measures?
Locals transacted 73.32% of properties in Dec 2021, which peaked at 78.08% in Jan 2021. However, the transactions declined since then. By April, sales dipped from this group by 2.67%
In contrast, the local’s transactions in Rest Central Region (RCR) did not vary much. It peaked around Jan 2021 for a while and took a dip in Feb 2021, but came to rest on the same level on 1 April 2022 as it was in Dec 2021.
However, the largest fluctuation in sales proportion was noticed in Outside Central Region (OCR). In Dec 2021, 83.36% of locals owned properties in this area, but soon after that, transactions started declining. On 1 April 2022, it dropped by 6.99%.
The masses usually prefer OCR to buy houses as they are more affordable. The data proves that the cooling measures most affected the masses. As for CCR, the price of houses in this area is more expensive than they are in central Singapore. The locals seem to stall committing to a big investment in face of the cooling measures and waiting for things to cool off a little bit.
But much has not changed for RCR buyers. They are usually upper-middle-income earners who have enough cash to pay a higher deposit for a moderately priced house. Thus, the cooling measures do not seem to either scrape of their savings or add to their property cost that significantly.
Which segment did the foreigners find most interesting despite the cooling measures?
In the above segment, we have seen that foreigners’ proportion of transactions has actually increased in the period between Dec 2021 and Apr 2022. The 30% Additional Buyer’s Stamp Duty (ABSD) did not seem to dampen their buying sentiment.
Observe the graph and you will see that foreigners’ ownership in transactions increased by 2.67% in CCR. In RCR, the transactions’ ownership picked up by only 0.24%, which you can rule as insignificant. But most interestingly, foreigners’ main attraction seemed to be the OCR. In Dec 2021, their ownership was only 16.64%, which increased by 6.99% to 23.63% in April 2022. It seems what Singaporeans’ loss has become foreigners’ gain!
Who is making the lion share of foreign investment in Singapore property?
Now, the question arises who are these foreigners who are increasingly taking Singapore property ownership. The graph below reveals China and Indonesia are showing the most interest in the nation’s real estate. Other than that, an unspecified group and foreign companies are buying up Singapore properties. The unspecified group must be the ultra-high net worths who can afford to pay in cash. They don’t have to take loans, so their names don’t usually appear in the records.
Why do foreigners find Singapore properties so attractive?
They find it beneficial to acquire a piece of Singapore because it is one of the first movers in border reopening. Foreigners had early accessibility to enter the country and buy profitable properties to diversify their investment. The growing economy and stability further assure them that their money is in a safe harbour in this critical time.
Apart from that, many companies in Singapore wanted to recruit foreigners. But they could not arrange employment passes in the last 2 years due to the on and off lockdown, creating a backlog. Now that the government is allowing foreigners to enter the country, many foreigners are coming to the country for work. And they need a place to settle down. This translates to genuine hard demand, higher than the locals.
And if you look at it purely from an investment point of view, the rental of Singapore properties is going up like crazy. Some units in my hand had a rental spike of 20% to 30%. I have seen many tenants confirm units even without viewing them. They are ready to pay $10,000 per month for a unit that has a rental value of $7,000 in the market.
Some reason for this rental spike is due to the pent up demand:
- During Covid, many constructions of properties have been delayed. The rising inflation caused the material prices to increase, which further slowed down their completion. So, people who were supposed to move into their own houses need a temporary place to rent until their home is ready.
- The foreigners coming to Singapore need an immediate place to settle down. This influx of foreign tenants is building up the rental market.
- The more tenants are growing, the more it is giving birth to supply shortage.
- There is still a large gap between the demand and supply of rental properties, which is translating into a fast-growing rental market.
Which price range of properties are most impacted by the cooling measures?
The demand for properties varies by the price they offer. This segment will help us to understand which properties are most impacted by the cooling measures and why?
Buyers interested to buy houses for less than $1 million are usually the masses interested in condominiums in the OCR. Looking at the graph, we can see that the masses were largely impacted by the cooling measures. Their sales proportion dropped dramatically by 22.94% from Dec 2021 to Mar 2022.
The upper-middle-income earners can usually afford houses between $1 million to less than $3.5 million. They usually own terrace houses in the OCR or town condominiums. This group of people’s buying proportion also dropped by 14.02%.
The third group of people are those who can afford a 4 bedroom house downtown or a semi-detached house. Similar to the first group, their transaction proportion was also largely dropped, by 20%, post the pandemic.
The fourth group in our list are those who can afford large expensive houses up to $11 million. They have the ability to buy a penthouse in a condominium or a large 4 bedroom house in CCR. This group seems to have dropped in sales proportion by 9.19%, comparatively lower than the previous three groups we have evaluated.
But the most surprising pattern was revealed by the group who can afford houses worth $11 million and above. This segment of buyers usually buys Good Class Bungalows (GCB) and super penthouses with a built-up size of around $7,000 per square foot (psf). Their sales proportion was in fact on a rise in Dec 2021 contrary to any of the groups above. It did drop in transactions in Feb 2022, but by Mar 2022, it started picking up again.
READ: Before & after effect of global events on Singapore real estate to know about the impact on Singapore real estate due to global events.
Cooling measures seem to deter mostly the masses and private residential buyers interested in houses below $10 million. They also comprise the terrace house owners and mid landed homes. But buyers in the higher range, who can afford penthouses or super luxurious homes, are in fact rising.
That means ultra-high net worths, foreign influentials and the super-rich locals, who had a drastic growth in wealth and looking to upgrade, are people who are building up demand in Singapore real estate even post the cooling measures.
However, investing in real estate needs skills, experience and a sharp sense of analysis and connection. Making your biggest commitment needs resources.