Singapore residential market to see gradual increase of Chinese buyers
When the Chinese government stated on January 8 that it will relax its stringent restrictions for overseas travel and its quarantine regulations relating to pandemics, the local real estate market went into a frenzy. The return of Chinese property purchasers to Singapore in large numbers to make new real estate investments is an event that is anticipated to take place. However, according to a research published by a real estate brokerage in Asia known as Huttons Asia, the recovery of Chinese investors in the real estate market may take longer than was previously projected.
As a result of the reopening of borders and the removal of quarantine restrictions in China, hotels and travel agencies in China have reported an increase in the number of inquiries from travelers based in China. This comes ahead of the upcoming Lunar New Year festive period, which officially begins on January 22. International travel is anticipated to surge during this time. Thailand, South Korea, Singapore, Malaysia, and Australia are among the most popular international travel destinations for Chinese tourists in the Asia Pacific area.
Despite this, Huttons Asia believes that the economic climate is becoming more unfavorable as a result of the ongoing rise in interest rates around the globe. As of November 2022, Singapore’s headline inflation has grown by around 6.7% year-over-year, and housing prices have similarly increased by 8.4% year-over-year for 2022, while the three-month Sora rate was 3.0019% as of January 9 of this year. The Singapore Overnight Rate Average (Sora) is the standard for determining the interest rate benchmark.
It is anticipated that this year’s buying sentiment among foreign buyers, including those from China, will remain cautious in light of economic uncertainties and the “prohibitive” 30% ABSD, which will likely cap overall foreign buying demand this year, according to Huttons. China is one of the countries whose buyers are expected to exhibit this sentiment.
Based on the Bazi Analysis Singapore of transaction data produced by the firm, the number of residential properties purchased by Chinese purchasers in Singapore in 2011 was 1,637. As a result of the government imposing an extra buyer’s stamp tax (ABSD) of 10% on foreign purchasers as part of the property cooling measures in December 2011 to dampen demand among foreign house buyers, the number of units sold in 2012 fell by 62.2% year-over-year to 618. The additional ABSD for foreign purchasers increased from 15% in 2013 to 20% in 2018 as a result of subsequent property cooling measures. The ABSD reached a new high of 30% in the year 2021.
Despite the existence of this transactional stamp tax, some wealthy Chinese purchasers have continued to make significant investments in quality residential properties in Singapore. EdgeProp Singapore announced in June 2022 that an anonymous Chinese customer has acquired 20 apartments at the upcoming luxury condominium Canninghill Piers at Clarke Quay. The development is located in the Clarke Quay neighborhood. The bulk transaction is over $85 million, which comes out to an average price of around $2,773 per square foot (psf), and the majority of the apartments are three- and four-bedroom apartments spread over many stacks.
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