news

City&Country: Offshore-- Singapore pull

Last year, Malaysians were the largest group of foreign buyers in the Singapore private residential market, followed by Indonesians, mainland Chinese and Indian nationals, according to a study by DTZ as at Dec 15. This was the first time in at least three years that Malaysian buyers have outnumbered Indonesians, who have traditionally occupied the top spot (see charts).

Investors have cited push factors, say property players, including the currency appreciation of S$1 to RM2.40, the socio-political situation in Malaysia and some of the country's policy measures, most notably, the re-implementation of the Real Property Gains Tax, which as at end-December was fixed at 5% for properties sold within five years of purchase.

There were also pull factors, most notably "the IR effect", says Kuala Lumpur-based Daisy Chiu, director of corporate real estate at Malaysian property consulting firm Hall Chadwick Asia. The completion of the integrated resorts at Marina Bay and Sentosa this year, with the prospect of more than 30,000 new jobs, is attractive to property investors in the private housing market.

Additional factors are limited supply of land in Singapore; good infrastructure and expanding public transportation system, particularly the MRT network; a transparent government and ease of buying and selling property; and the Orchard Road makeover - all lead to the prospect of capital appreciation in the next five years, says Chiu, a Singaporean. "It's not surprising why investing in Singapore property has been so compelling to buyers across the Causeway," she says.

There was also one other factor: Throughout 2009 and into the new year, giant property developer Far East Organization (FEO) has been holding monthly events and weekend exhibitions showcasing its projects in Malaysia. "No other Singapore developer has been going up to Malaysia on such a regular basis to hold events - private dinners for invited guests or joint seminars with banks," points out Chiu. Hall Chadwick is the appointed marketing agent for FEO in Malaysia.

Also, FEO launched 12 projects last year and sold more than S$2.44 billion worth of properties, making it a record year for the developer. It officially launched The Shore Residences, its 408-unit development on Amber Road, on Jan 1, making it the first official launch of the year. As at Jan 7, 186 of 338 units have been sold.

Early last January, FEO held its first event jointly with Citibank at the Mandarin Oriental Hotel Kuala Lumpur. "The event was oversubscribed," recalls FEO's chief operating officer, Chia Boon Kuah. The expected turnout was 60 to 70 people, but more than 200 showed up that day.

At each Malaysian event, Chia pitched the Singapore makeover story - from Marina Bay to Orchard Road and Sentosa, all the way to Changi Business Park in the east, and one-north as well as the new Jurong Lake District in the west. He also talked extensively about the MRT network, education system, and lifestyle elements like the new recreational parks and waterfront sports.

Initial scepticism but 'trickle turned into flood'
"Initially, they were sceptical," admits FEO's Chia. It wasn't just the currency factor but the quantum price as well because something that costs S$5 million in Singapore translates into RM12 million. In addition, the price per square foot in Singapore is also higher relative to Malaysia. In 1Q2009, the bleakest period of the global financial crisis last year, existing condominiums in the prime Cairnhill area were changing hands in the resale market for S$1,260 to S$1,600 psf - or RM3,088 to RM3,921 psf, prices that even the most luxurious apartments in the prime Kuala Lumpur City Centre didn't command, says Chia. "We countered by telling them that from January to March [2009] - the lowest time - they could have had the best of Orchard Road for less than S$2,000 psf," he says.

The first group of buyers comprised the wealthy who had a more international outlook and an affinity to Singapore. "They believed in the Singapore transformation story," says Chia. "Slowly, they came. And the trickle turned into a flood."

Another segment of buyers had their children's education in mind. "Instead of sending them to Australia, they decided to send them to Singapore," says Chia. A third group was the offspring of the wealthy. After graduating from top universities in the UK and the US amid a global economic slump and a high unemployment rate last year, they decided that Singapore was the next best place for international exposure. "So, their children came to Singapore to work, and the parents bought them apartments," says Chia. "That gave an additional boost to the buying momentum."

The most popular FEO project among Malaysians was the 278-unit Cyan in Bukit Timah, with its proximity to good schools and Orchard Road. Not surprisingly, Malaysians were the largest group of buyers in the condominium, says Chia. As at end-November, 102 units were sold at a median price of S$1,905 psf, according to the latest monthly sales data by URA.

Also popular among Malaysian buyers was FEO's 280-unit Vista Residences, in the neighbourhood of Thomson Road and Balestier. As at end-November, 186 units were sold at a median price of S$1,265 psf. Chia says Vista Residences' appeal is its proximity to the Novena area - near shopping malls and the old Singapore charm of Balestier, with its shophouses and local eateries.

Malaysian buyers generally bought apartments in the S$1 million to S$5 million range, and those who bought units in Cyan chose those mainly in the S$2 million range, he adds. While there are exceptions, the general preference has been for unit sizes of around 2,000 sq ft, unlike Indonesian buyers, who favour larger units of 3,000 to 4,000 sq ft.

FEO's overseas distribution network
Permanent residents and foreigners comprised about 30% of the total buyers of FEO's projects last year, with the mainland Chinese in top spot, followed by Indonesians and Malaysians. The reverse was true in the general market trend, as seen by DTZ. "The breakdown reflects the overseas distribution network that we've built up in the last six to seven years," says Chia.

FEO had set up marketing representative offices overseas in key markets in Asia. In Indonesia, it has offices in Jakarta, Surabaya and Medan, as well as a marketing representatives in Pekanbaru. In China, it has an office in Shanghai and Shenzhen, and three years ago, it even set up an office in Seoul, South Korea.

Indonesians, Malaysians, mainland Chinese and non-resident Indians form the traditional pool of foreign buyers and generally account for 60% of all foreign buyers of Singapore property, says Joseph Tan, executive director of residential services at CB Richard Ellis (CBRE).

The buying momentum from overseas buyers picked up pace in 2H2009. According to the URA flash estimate, overall private residential property prices jumped 7.3% q-o-q in 4Q2009, lower than the 15.8% q-o-q rise in the previous quarter. The price index rose 18.3% in 2H2009, however, after a dip of 14.1% in 1H, which translates into an overall 1.7% increase for 2009 as a whole, says CBRE.

The estimated take-up of 14,500 new homes and an increase of nearly 2% in the price index showed that the residential market performed very well in 2009, despite uncertain economic conditions, says CBRE Research executive director, Li Hiaw Ho.

Backed by a more positive forecast of 3% to 5% growth in the Singapore economy, CBRE expects residential market sales activity to move at a moderate pace in 2010, with 8,000 to 10,000 new homes expected to be sold this year, and a rise of 5% to 10% in prices.

Prices in 2010 to surpass previous peak?
"Although the pace of private home price growth slowed in the last quarter of 2009, the 7.3% quarterly increase is still quite significant," says Nicholas Mak, a real estate lecturer at Ngee Ann Polytechnic. The increase indicates that there is still enough momentum in the market to push prices to higher levels this year, he says, forecasting that the previous peak in private home prices (achieved in mid-2008) could be surpassed by year-end.

In the public housing market, average prices of HDB resale flats continued to gather strength as the rate of price growth crept up from 3.6% in 3Q2009 to 3.8% in 4Q. Mak attributes this rise to the robust demand from young families, new permanent residents as well as some homebuyers who turn to the HDB resale market as private properties become less affordable. He expects average prices in the HDB resale market to continue expanding another 8% to 15% in 2010, despite more new flats being offered in build-to-order exercises. "As long as the prices of suburban condominiums remain relatively high, there will be [room] for resale flat prices to expand," Mak adds.

This is a defining year for the Singapore property market and the city-state is shaping up to be a popular second-home destination for foreign buyers, particularly from China, India and Malaysia, in the coming years. "I'm confident that there will be new buyers into Singapore property from these Asian countries," says Chia.

Cecelia Chow is editor of City&Country, The Edge Singapore


This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 789, Jan 18-24, 2010.

Looking for properties to buy or rent? With >150,000 exclusive listings, including undervalued properties, from vetted Pro Agents, you can now easily find the right property on Malaysia's leading property portal EdgeProp! You can also get free past transacted data and use our proprietary Edge Reference Price tool, to make an informed purchase.
SHARE