Hot spots for foreign buyers in Singapore’s residential market

By Ong Teck Hui / JLL | April 28, 2017 11:00 AM SGT
Foreigners are expected to make a comeback in Singapore’s residential property market after shying away from it since 2012 following the imposition of the additional buyer’s stamp duty (ABSD).
In the first three months of 2017, the proportion of foreign buyers in the private residential market increased slightly to 6.9% from 6.7% in 2016 (see Chart 1). Although this is a far cry from the 17.5% seen in 2011, it is nevertheless an encouraging level of transaction among foreigners.
The recent easing of cooling measures is seen as a signal that the unwinding of measures has begun and should continue to stoke confidence as well as boost sentiment. Coupled with the likely bottoming of prices, more foreign investors are expected to return to the Singapore residential sector to capitalise on the potential price upside.
Hot spots for foreigners in 2016
We hope to shed light on hot spots favoured by foreigners by looking at where they have been buying in 2016 (see Chart 2).
Of the 1,078 purchases made by foreigners in 2016, about 61% were located in the Core Central Region (CCR), with transactions concentrated in Districts 9 and 10. Other hot spots include projects located along the Mass Rapid Transit (MRT) lines, particularly the North-East Line, and the Jurong Lake District.
Hotspot #1: Prime residential districts
The projects with the most foreign buyers in this area in 2016 were:
• Cairnhill Nine (77 foreign purchases);
• OUE Twin Peaks (48 foreign purchases);
• Sophia Hills (23 foreign purchases);
• Ardmore Three (17 foreign purchases);
• D’Leedon (14 foreign purchases); and
• Gramercy Park (14 foreign purchases)
The prime Districts 9 and 10 have traditionally been popular with well-heeled foreign buyers, owing to their exclusivity and prestige. In terms of location, Districts 9 and 10 are also close to the famous Orchard Road shopping belt where international luxury brands have a presence. In addition, the CBD is a mere 10-minute drive, or four MRT stops, away.
For the reasons above, these prime districts have been, and continue to be, sought after by expatriate tenants. In 2016, Districts 9 and 10 had the highest number of leasing contracts, contributing to 20% of the island-wide leasing volume.
Beyond these locational attributes, attractive prices, discounts and other incentives offered by developers for many of the projects in this market segment have also lured foreign buyers back.
Early in 2016, Cairnhill Nine surprised the market with relatively low launch prices of about $2,500 psf compared with prices above $3,000 psf for projects in the vicinity launched during more buoyant times. Cairnhill Nine achieved a take-up rate of 89%, or 177 units, during the first month of launch — a significantly higher take-up rate compared with other prime condos launched in the Central Region in 2015 and 2016.
The success of Cairnhill Nine demonstrated that there was a pent-up demand in the prime districts. Riding on the momentum, developers of other projects in the sub-market offered discounts and various incentive schemes, such as deferred payment schemes and ABSD absorption, to move sales, as many of them are under pressure to meet Qualifying Certificate and ABSD remission clawback deadlines. QC extension fees are chargeable when non-Singaporean developers fail to sell all units in their residential developments within two years from the developments’ completion date. Developers need to pay ABSD if they are unable to build and sell all the units in their development within five years from the date of land acquisition.
Attractive price levels, incentives and discounts were major contributors to bringing more foreign buyers back to the Singapore prime residential market.
Hotspot #2: Along MRT Lines
Beyond the prime districts, hot spots for foreign buyers are mainly located along MRT lines, which provide travel convenience. If investors intend to lease out the units, the proximity to public transport, especially MRT stations, is a crucial criterion for them to attract tenants, as most do not own private vehicles.
The North-East Line seemed very popular with foreign buyers in 2016. The most popular projects along this MRT line were:
• Sturdee Residences (19 foreign purchases);
• Forest Wood (18 foreign purchases); and
• The Poiz Residences (14 foreign purchases)
These are large-scale developments newly launched at end-2015 and in 2016. Sturdee Residences is on the city fringe in Little India and within walking distance of the Farrer Park MRT station. The attraction of Forest Woods is its proximity to the Serangoon MRT station and Nex shopping mall. Meanwhile, The Poiz Residences is part of a mixed-use development with a three-storey shopping mall and located next to the Potong Pasir MRT station.
These pull factors led foreign investors to purchase properties along the North-East Line.
Hotspot #3: Jurong Lake District, the future second CBD
To the west, Lake Grande had a successful launch in 2016, with a takeup rate of 93% in the first month of launch. Among the buyers, 19 were foreigners. Adjacent to Lake Grande is Lakeville, where 24 of the purchasers were foreigners.
Older projects in the vicinity, such as The Lakefront Residences, The Lakeshore, Lakeholmz, The Mayfair and Parc Oasis, also saw foreigners snapping up units in the secondary market.
Jurong Lake District is positioned as the second CBD in Singapore and the first smart city in the country. It is also where the terminus of the future high-speed rail connecting Kuala Lumpur and Singapore will be located. With all the future investments and infrastructure in place, more businesses are expected to be attracted to this area. This will in turn increase the housing demand to support the upcoming employment hub. Potential price appreciation would be the key factor attracting buyers to this region.
From purchases made by foreigners in 2016, their key consideration is that the property should be a good investment. A significant proportion of the properties purchased by foreign investors was located in prime residential districts, and transacted at substantial discounts compared with the peak in 2013.
Anticipating that the market is close to the bottom, these buyers are projecting that prices will recover and that they will see capital gains in the future.
For properties outside CCR, proximity to MRT stations — ensuring connectivity and competitive advantage in leasing — is a key factor for many foreign buyers.
Properties in growth areas such as Jurong Lake District are also appealing to foreign investors, owing to their potential price appreciation.
As sentiment remains positive and the market is close to the bottom, more foreign investors are expected to return to the Singapore residential market to capitalise on the potential price upside.
In 1Q2017, the proportion of foreign buyers in the private residential market increased slightly to 6.9% from 6.7% for the whole of 2016. With the recent easing of the cooling measures and the expectation of a market recovery, more foreigners are likely to return to the Singapore residential market.
Ong Teck Hui is national director of research and consultancy at JLL Singapore
This article appeared in The Edge Property Pullout, Issue 777 (May 1, 2017) of The Edge Singapore.