Navigating the real estate market: From Singapore to Bali, Dubai, Japan and the UK
SINGAPORE (EDGEPROP) - Singapore’s latest property cooling measures on April 27 have many investors rethinking their strategy. The turnout of about 1,000 at EdgeProp Singapore’s Property Investment Festival at Suntec Singapore Convention and Exhibition Centre over the weekend of July 15-16 shows strong investor appetite in exploring alternative investment opportunities both in Singapore and abroad.
Local market opportunities showcased that weekend included landed housing and new Core Central Region (CCR) projects, such as Klimt Cairnhill in prime District 9 and the upcoming TMW Maxwell in the City Centre (District 2), with unit sizes that appeal to investors.
The booth of luxury project Klimt Cairnhill, a 138-unit luxury condo by Low Keng Huat
Overseas markets showcased over the weekend included Bali, Dubai, Japan’s key cities of Osaka and Tokyo, London and other major cities in the UK such as Birmingham, Bristol and Manchester. There were also opportunities for those interested in exploring fractional ownership and tokenisation.
The event started with a panel featuring some of Singapore’s leading property consultants — Cushman & Wakefield, Edmund Tie and Savills — discussing the property market in 2H2023.
Panel discussion (from left): Desmond Sim, CEO of Edmund Tie; Alan Cheong, executive director of research & consultancy, Savills Singapore; Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield; and Timothy Tay, associate editor of EdgeProp Singapore as moderator (Photo: Albert Chua/EdgeProp Singapore)
Capital to focus on commercial sector
Desmond Sim, CEO of Edmund Tie, recounts the night the latest round of property cooling measures was announced, about 15 minutes before midnight on April 27. “I got the text at about 11.45pm about the new cooling measures and a call from URA at 1am about my take,” says Sim. “After that, it was a match between Arsenal and ManCity (Manchester City).”
According to Sim, the impact of the cooling measures was felt across the entire property market. The 30% additional buyer’s stamp duty (ABSD) for foreigners was already steep. “Doubling the ABSD to 60% for foreigners was one of the catalysts for driving more capital to focus on the commercial sector,” he adds. (Find Singapore commercial properties with our commercial directory)
For example, commercial conservation shophouses in the CBD have already jumped to a record $8,000 psf. Grade-A office tower Solitaire on Cecil has already seen prices of whole strata office floors sold for $4,100 to $4,300 psf, and F&B units on the first level fetch $5,400 psf and close to $6,000 psf. The strata-titled office tower was fully sold within five months of its January launch.
Panellists (from left): Desmond Sim, CEO of Edmund Tie; Alan Cheong, executive director of research & consultancy, Savills Singapore; Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield; and Timothy Tay, associate editor of EdgeProp Singapore as moderator (Photo: Albert Chua/EdgeProp Singapore)
More competition ahead
The Singapore housing market has not totally wilted but has chugged along, supported primarily by local home buyers. Last year, there were just 17 new project launches, most of which were substantially sold. “Some locations were devoid of new project launches for some years,” says Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield.
He points to the 407-unit Piccadilly Grand at Farrer Park, where property consultants had initially expected to launch at about $1,900 psf. The 99-year leasehold project was launched in May 2022 and was 77% sold on its launch weekend at an average price of $2,150 psf. Today, less than a handful of units are available for sale. “It was the first major mainstream project launch of 2022, and it was at Farrer Park, a location that hasn’t seen a new launch since 2019,” says Wong.
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The number of new project launches this year is expected to more than double last year’s. “Developers have to be prepared to see more competition in the market, especially with two to three projects launching in the same weekend,” he adds.
Therefore, 40% sales on the launch weekend is “a very healthy number”, notes Wong. “Developers will be able to increase prices gradually,” he says.
Wilson Teh, executive director and co-founder of Rezt+Relax Interior Design, talking about design and dealing with tight spaces (Photo: Albert Chua/EdgeProp Singapore)
Local demand, smaller units
In the face of high interest rates, Alan Cheong, executive director of research and consultancy at Savills Singapore, sees most buyers swayed towards new project launches as they do not need to draw down on their loans under the normal progress payment scheme.
Cheong reckons that most buyers today, including HDB upgraders, are buying for investment. “What flies off the shelf on the launch weekend are the one- and two-bedders,” he says. “If you’re upgrading, would you buy a one- or two-bedroom unit? You’re likely buying such units for investment and rental income.” (Find HDB flats for rent or sale with our Singapore HDB directory)
Developers with projects in the CCR will now cater to local demand as the 60% ABSD has effectively curtailed foreign buyers. Residential projects likely to achieve healthy sales in the current market environment are those with one- and two-bedders making up more than half the units. “And you can see developers doing that already,” says Cheong.
Tan Hong Boon, JLL executive director of capital markets, talking about the roadblocks to collective sales today (Photo: Albert Chua/EdgeProp SIngapore)
Caution reigns in collective sales
The latest property cooling measures have also affected the collective sales market. In the last peak from 2015 to 2019, collective sales totalled nearly $21.5 billion. From 2020 to 2023, collective sales amounted to under $7 billion, just one-third of the sales value in the last peak. “We are going through a lull period,” says Tan Hong Boon, JLL executive director of capital markets, in his presentation on “Unlocking en bloc opportunities in Singapore: Key factors and considerations for property owners”. (See potential condos with en bloc calculator)
Analysts’ rule of thumb is that if the unsold housing stock — residential units in the planning stage and already in the pipeline for launch — falls below 25,000 units, developers should be actively looking to replenish their landbank by acquiring sites through government land sales (GLS) or collective sales.
On average, 10,000 new homes are sold in Singapore every year. Hence, 25,000 units are equivalent to a housing stock of 2½ years.
The unsold housing stock had plunged to 15,000 units in 2021 and is now hovering at around 16,000 units.
Despite depleting residential stock, however, developers continue to be cautious about acquiring new sites, notes Tan.
Jacintha Pillay, deputy managing director of Sim Mong Teck & Partners, discussing decoupling and trusts when buying property (Photo: Albert Chua/EdgeProp Singapore)
Narrowing gains
The government is ramping up its supply of sites through the GLS programme. These sites could yield 9,250 units this year, the highest since 2013. “That’s barely enough to meet annual demand,” says Tan. “Collective sale sites can still play a role in contributing to the housing supply.”
Historically, residential sites make up over 80% of the collective sales. However, in 2020-2023, commercial, mixed-use and non-residential sites have contributed over 40% of the collective sale transactions. (Find Singapore commercial properties with our commercial directory)
Notable deals include Ming Arcade, sold for $172 million in December 2022; Golden Mile Complex, for $700 million in March 2022; Tanglin Shopping Centre, for $868 million in February 2022; and Peace Centre and Peace Mansion, for $650 million in December 2021.
Property consultants find securing 80% support for a collective sale increasingly challenging in the current environment. Capital gains from a collective sale have also narrowed. In the past, owners could look forward to 50% to 80% gains in a collective sale, some surpassing 100%. According to Tan, most of the recent collective sales were transacted at prices between 25% and 35% above the current market values of the units.
Foreign homeowners are also resistant to a collective sale as they have to pay a 60% ABSD if they were to buy a replacement residential unit, says Tan.
Clive Chng, associate director of Redbrick mortgage brokers talking about financing options for homebuyers and property investors today (Photo: Albert Chua/EdgeProp Singapore)
Policy changes
Several policy changes have also raised the bar for collective sales. With effect from September 2022, remnant land purchased from the Singapore Land Authority would be at the full market value. Before that, the price was just 50% of the land value.
Last year, the government also announced that it would harmonise the definition of floor area by the different agencies. However, this harmonisation will reduce developers’ saleable area by about 4% to 5%, says JLL. And it came into effect from June 1.
With interest rates still high, construction costs have also increased since Covid. Hence, construction costs are 50% to 60% higher today. In the past, the construction of a suburban project in the OCR would be estimated at $250 to $350 psf, but now, it is $550 to $650 psf, says Tan.
However, the biggest hurdle for a collective sale is that many of these properties are “overpriced today”, says Tan.
Bernard Tong, CEO of EdgeProp Singapore, on the growth areas in Singapore under the MasterPlan MasterClass series (Photo: Albert Chua/EdgeProp Singapore)
Growth areas: Downtown
In the MasterPlan MasterClass presentation on “Trends and areas undergoing transformation”, EdgeProp Singapore CEO Bernard Tong discusses three growth areas: Downtown, East Coast and Lentor.
The Downtown area will be a true work, live, play neighbourhood with more amenities, served by new MRT stations on the Downtown and Thomson-East Coast Lines, says Tong.
Due to the CBD Incentive Scheme, redevelopments are taking place in the CBD. They include the mixed-use development TMW Maxwell on Maxwell Road (redevelopment of the former Maxwell House) by a joint venture between Chip Eng Seng Corp, SingHaiyi Group and Chuan Investments; Skywaters Residences (redevelopment of 8 Shenton Way) by Alibaba and Perennial; and Newport Residences/Newport Tower (former FujiXerox Towers) by City Developments Ltd (CDL).
IOI Properties’ upcoming Marina View Residences will feature 748 new residential units and a new luxury hotel. “And it’s another major project to look out for,” says Tong.
The profile of the downtown area will continue to transform over the next few years as more GLS sites at Marina Gardens, near Gardens by the Bay, are progressively released for sale. The first site launched there was the residential plot at Marina Gardens Lane, for which a Kingsford Group-led consortium submitted the winning bid of $1.034 billion ($1,402 psf per plot ratio, or psf ppr) at the close of the tender on June 27. The 99-year leasehold site at Marina Gardens Lane can be developed into 790 residential units with an 8,073 sq ft commercial podium.
According to Tong, the GLS sites in the Marina Gardens neighbourhood could yield about 10,000 new homes in the Downtown area. Given the number of residential units in the area in the future, he anticipates demand for schools there.
Melody Tan, head of agency training & marketing showcasing EdgeProp training tools (Photo: Albert Chua/EdgeProp Singapore)
East Coast
Another popular area is the East Coast, which saw three new project launches in District 15 this year. Last weekend saw the launch of Grand Dunman, with 550 of 1,008 units (54.6%) sold at an average price of about $2,500 psf, making it the best-selling project since Kingsford Group cleared 600 of its 1,862 units at Normanton Park in January 2021.
Nearby, the 638-unit Tembusu Grand by CDL and MCL Land is 57.2% sold at an average price of $2,464 psf. The 816-unit, freehold The Continuum by Hoi Hup Realty and Sunway Group has sold 230 units (28.2%) at an average price of $2,734 psf, based on caveats lodged.
The tender for the GLS site next to Tembusu Grand closed on July 18. The site received two bids, with Sim Lian Group’s $828.8 million ($1,069 psf ppr) just 0.1% higher than the joint bid of $828 million ($1,068 psf ppr) by CDL and Frasers Property.
The East Coast area will see more infrastructure, especially with seven MRT stations on the Thomson-East Coast Line opening in the area next year. Another upcoming area is a 15km reclaimed stretch, “Long Island”, from Marina East to Changi. It will offer protection against floods and rising sea levels and a new spot for leisure and recreation, Tong points out. A new residential precinct across 60ha at Bayshore is also in the works, with an estimated 10,000 new homes.
The crowd on July 16, with the weekend garnering a crowd of 1,0000 (Photo: Albert Chua/EdgeProp Singapore)
Lentor Hills estate
In Ang Mo Kio, the upcoming Lentor Hills estate is taking shape. Based on the GLS sites awarded in the new residential enclave, over 3,400 residential units are expected to be launched over the next five years, says Tong. The area will benefit from the Thomson-East Coast Line, especially with the opening of the Lentor MRT Station in August 2021.
The latest launch at Lentor Hills was the 598-unit Lentor Hills Residences by a consortium of Hong Leong Holdings, GuocoLand and TID (a joint venture between Hong Leong and Mitsui Fudosan). The project sold 301 units (50.3%) at an average price of $2,080 psf during its July 8-9 launch weekend.
Lentor Hills Residences is linked to the Lentor MRT Station via a covered walkway. It is also connected to the 96,000 sq ft mall with a supermarket and childcare centre at the neighbouring integrated development, Lentor Modern, by GuocoLand. Sitting on top of the mall and the MRT station is the 605-unit Lentor Modern condo, which is 91% sold at an average price of $2,102 psf since its launch last September.
Elliot Sheehan, international sales director at Bali-based developer Mirah Investment & Development, talking about investment opportunities in Bali (Photo: Albert Chua/EdgeProp Singapore)
Holiday homes in Bali tap fast-recovering tourism market
Turning to overseas property markets, while Bali has long been known as a popular vacation destination, over the last decade, its properties have attracted a growing number of international buyers eager to invest in holiday homes that cater to Bali’s steady stream of tourists and its growing segment of expatriates.
To be sure, Bali is seeing a swift recovery in tourism numbers, reaching a peak of 16 million visitors in 2019 before the pandemic. As more tourists return, average occupancy rates in many of Bali’s key areas, such as Canggu, Uluwatu and Nusa Dua, have rebounded to over 70%, according to Elliot Sheehan, international sales director at Bali-based developer Mirah Investment & Development. As these areas continue to see growth, properties there appeal to investors, given the stable occupancy rates and steady rental income.
In addition, foreign investors will also benefit from the rollout of the Second Home Visa by the Indonesian government in December 2022. This new initiative provides long-term visas allowing foreign passport holders to reside in the country for up to 10 years.
Mirah Investment, which showcased properties in Bali (Photo: Albert Chua/EdgeProp Singapore)
Foreigners are allowed to buy leasehold properties in Bali, usually with a tenure of around 25 years with a 20-year extension. For investors, possible investment strategies include purchasing a property off-plan with the intention of selling it upon completion. “You can flip a property in Bali within an 18-month period,” Sheehan says, adding that investors can reap a capital gain of between 30% and 50%.
Alternatively, investors seeking stable yields may choose to buy a property with the intention of renting it out to tourists. This method of investing allows them to earn rental returns of at least 10%, in addition to enjoying long-term capital growth, Sheehan notes.
Mirah Investment & Development has a number of projects under development that are available as investment opportunities. One of these is Kiara Beachfront, a 94-unit serviced apartment development on the Nusa Dua beachfront with units starting from US$259,000 ($343,000). Another development is the 106-unit Amali Luxury Residence in Uluwatu, with units starting from US$355,200.
Suki Lin, general manager of Lifer Realty, talking about the Dubai property market (Photo: Albert Chua/EdgeProp Singapore)
Dubai offers up high rental yields for investors
The Dubai property market is seeing a new wave of interest among international investors. Following a lull caused by the pandemic, this city in the United Arab Emirates (UAE) has seen a swift recovery in its economy, prompting a strong rebound in its real estate market.
According to Dubai real estate company Lifer Realty, the city is able to thrive in large part due to expatriates, who are drawn by Dubai’s attractive tax policies (notably, its absence of personal income tax) as well as its golden visa programme, which offers long-term residency and other advantages such as 100% ownership of their business in the UAE, ability to sponsor family, and healthcare benefits.
Today, expatriates make up some 95% of Dubai’s population, underpinning the demand for homes in the city. Suki Lin, general manager of Lifer Realty, points out that the population will cross four million people by 2026, with the rental market expected to continue seeing increases in prices and yields. “Currently, Dubai already has one of the highest rental yields in the world,” she says, adding that yields can typically go from around 6% up to 10%.
The exhibition booth of Sobha Realty and Lifer Realty, showcasing properties in Dubai (Photo: Albert Chua/EdgeProp Singapore)
The high yields are a key attraction for investors, in addition to the diverse range of property types available in Dubai, including villas, apartments and landed homes. Lin adds that despite the city’s reputation as a property market catering mainly to the ultra-rich, opportunities abound for a broader segment of investors. New properties are available from $500,000 for a typical two-bedroom apartment unit.
Areas popular with investors in Dubai include Palm Jumeira, Dubai Marina and Creek Harbour, which offer a strong pipeline of new residential projects and lifestyle amenities.
In addition to rental yields, Lifer Realty says properties in Dubai are poised to benefit from long-term capital appreciation amid various tailwinds. Dubai is also popular as a tourist destination, says Lin, which has in turn fuelled the growth of the short-term rental market. Major infrastructure improvements were carried out in the city leading up to the World Expo, which Dubai hosted from October 2021 to March 2022.
Chua Shir Yee, JLL head of international residential, Singapore, talking about the Japan property market, particularly Tokyo and Osaka (Photo: Albert Chua/EdgeProp Singapore)
Low supply, steady demand underpin Japan’s property market
Japan is a hot favourite among overseas investors, mainly because interest rates remain relatively low. In the aftermath of the pandemic, Japan’s real estate market has remained resilient. Between 2021 and 1Q2023, residential property prices in Tokyo and Osaka grew 19.5% and 20.5%, respectively.
The price growth has been supported not just by steady demand amid Japan’s recovering economy but also by a lack of supply, notes Chua Shir Yee, JLL’s head of international residential, Singapore. “Supply in Tokyo has drastically come down in the last decade, while a similar drop has been seen in Osaka in the past couple of years,” she says. The two cities’ vacancy rates for residential properties stand at roughly 3%.
Because of the favourable supply and demand dynamics, Tokyo and Osaka remain the most popular destinations for investors looking to buy residential property in Japan.
Osaka, in particular, is garnering more interest as an investment destination, says Chua. As Japan’s second-largest city, Osaka has seen a steady growth in demand for housing. Osaka also has several major developments in the pipeline that are expected to boost the city’s infrastructure and offerings further.
The JLL booth showcasing properties from different countries (Photo: Albert Chua/EdgeProp Singapore)
In 2025, Osaka will host the World Expo, which is anticipated to attract an estimated 28 million visitors to the city. In addition, it will house Japan’s first casino via a US$8.1 billion integrated development targeted for completion in 2029.
Chua highlights that there is no differential treatment for foreigners compared to local buyers in Japan. “Unlike Singapore, there’s no additional taxes for foreigners when you buy property there,” she says.
Japan’s tax structure when buying properties includes a real estate acquisition tax (similar to Singapore’s buyer’s stamp duty) of 3% for land and 4% for buildings on the property’s value, a registration tax ranging between 0.1% and 2%, and a minimal administrative fee.
However, there is an annual property tax of 1.7% on the property value, which includes a city-planning tax. Owners who rent out their properties will also be subject to a tax on their rental income, ranging from 5% to 45%.
There is also a capital gains tax of 30.63% on net gain, which is reduced to 15.315% if the holding period is more than five years.
Germaine Chow, founder of I Quadrant and Crestbrick real estate agency, talking about investment opportunities in the UK (Photo: Albert Chua/EdgeProp Singapore)
Picking the right investment property in the UK
The UK remains a popular destination for Singapore buyers looking to invest in property. Germaine Chow, founder of real estate agency Crestbrick, attributes this to the strong fundamentals that support the property market, including growing demand and a lack of supply that have caused prices and rents to surge following the pandemic.
However, Chow notes that within the UK’s vast property landscape, investors need to discern which opportunities they choose to pursue and to seek a property that can offer “predictable wins” on their investment.
She cautions against buying properties targeted at foreigners with premiums compared to what a local buyer would pay. “You want to make sure that you’re buying a property at the same price as a local would,” she says.
The Crestbrick exhibition booth (Photo: Albert Chua/EdgeProp Singapore)
In addition, buyers intending to buy a property to rent out should look into areas with low vacancy rates, which indicates strong demand for rental properties in the area that would make it easier to find a tenant.
Citing data from UK letting agency Settio, Chow highlights that cities such as Manchester, London, Birmingham and Bristol have some of the lowest vacancy rates in the UK, ranging between 2.1% and 2.8%.
As a whole, Chow has a positive outlook on investing in the UK, noting that the property market remains undersupplied — an October 2022 report by JLL forecast a national shortfall of 610,000 homes over the next five years. In addition, construction costs, which have risen at an average of 6.6% per year based on data by Statista, remain a contributor to rising house prices.
Given this, Chow believes the time is ripe for investors looking to purchase a property in the UK. “I don’t believe prices will stay affordable for a long time, given that demand is so high while supply remains low,” she opines.
Check out the latest listings near Klimt Cairnhill, Solitaire on Cecil, Piccadilly Grand, Golden Mile Complex, Tanglin Shopping Centre, Peace Centre/mansions, Skywaters Residences, Tembusu Grand, Lentor Hills Residences, Lentor Modern, Lentor MRT Station
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