Time To Ease Curbs On Foreign Buying Of Landed Homes

Sources : The Straits Times, June 27, 2007

SINGAPORE’S increasing popularity with foreigners could signal that it is time to relax restrictions on overseas ownership of landed properties, according to a Goldman Sachs report.

The giant investment bank said in a research note that if curbs are relaxed across the board, it could spur further foreign buying of private properties.

It could also boost the residential property market by having ‘positive spillover from rising landed property prices to condominiums and apartments’.

The United States bank said the average price of a top-end bungalow is 35 per cent lower than that of a comparable condominium, which sells for about $26.3 million.

‘We think this price gap can narrow to parity or very close to it should the restrictions on foreign ownership of landed properties be relaxed,’ it said.

Under the Residential Property Act, foreigners and permanent residents are forbidden from buying landed property without government approval.

And a foreigner who does win approval can own only one landed property at a time and they must occupy the home, not rent it out.

If the rules are relaxed, developers with land banks for landed projects would benefit, the bank said.

Meanwhile, all residential developers could also ‘gain from even greater foreign buying interest given the positive message such a move would send’.

A land bank is a stock of land with planning permission already granted but where development has yet to occur.

Goldman reasoned that removing such curbs would not hurt the national objective ‘of giving Singaporeans a stake in the country by being able to buy and own residential properties at affordable prices’.

It said the possibility that the Government would loosen its reins on the land restrictions is higher now.

Goldman cited its discussions with developers which have affirmed its view of foreign interest in landed property.

The bank also referred to a change in the tone of government policy which has become firmly pro-immigration, it said.

‘We think relaxing restrictions on foreigners buying landed property would accelerate Singapore’s efforts to attract foreign talent,’ Goldman said, though it acknowledged that for now, there is ‘no certainty of any policy change’.

Goldman has estimated that about 2,800 landed homes with written permission for development will be let out into the market over the next few years.