Changing Face Of Foreign Owners

By Sonia Kolesnikov-Jessop

Malaysians and Indonesians have traditionally been the dominant foreign buyers of property in Singapore and they still remain at the top of the list. However, over the last year, their shares of the property market bought by foreigners have been diminishing in favour of other nationalities.

According to Donald Han, Managing Director (Singapore) of Cushman and Wakefield, requests for information are coming fast and furious from Middle Eastern, Indian and Korean investors, although investors from different counties are looking at different sectors of the market.

While the deeper-pocketed Middle Eastern buyers are more interested in District 9 and the Orchard Road areas, the Koreans, who typically have a US$1-$3 million budget, are looking at the fringes of the central core area. Indians generally target the mid-market to upper-tier market and are willing to go further into the suburbs like Clementi, Yishun and Bukit Batok, while Europeans tend to go for projects that are under construction.

“Europeans are playing the rising market. They’re not looking into yield but strictly looking into being an absentee investor. When the property is ready, they might offload it instead of having the headache of finding a tenant,” Han explains.

Data from the URA shows that the number of Korean purchasers increased 132% in 2006, while the number of French increased by 138%. Indian buyers were up 72%, while American buyers were up 67% and Australian buyers were up 45%. However, it should be remembered that some of these figures may be skewed by low base figures, professionals said.

“Singapore has long been a favoured country for foreign investors,” notes Chia Ngiang Hong, Group General Manager of City Developments Limited. “However, we’re also experiencing increased interest from many first-time foreign buyers as well as many from non-traditional markets. This is a positive sign that Singapore is developing into a global city for investors. It marks its success of transforming into one of the most attractive and exciting cities to live and work in.”

Global appeal
The latest URA data shows that foreign buying interest has remained strong so far this year. Purchases by foreigners made up 29% of total purchases in the first half of 2007, said Tay Huey Ying, Director of Research and Consultancy at Colliers International.

Between January 2006 and June 2007, 33.6% of foreign purchases were for properties in districts 9 and 10, while 12.1% of foreign purchases were for properties in District 15. In terms of pricing, 6% of all foreign purchases were for properties priced at S$5 million and above, and 39% were for properties priced between S$1.5 million and S$5 million, Tay revealed.

Given the ongoing restrictions on landed properties, the majority of the properties purchased were condominium units. Even so, there has also been a growth in the number of buyers for landed properties.

Based on DTZ Debenham Tie Leung’s analysis of caveats captured by the URA’s Realis database, foreigners bought 2,008 non-landed private homes in the first quarter of this year, accounting for 30.3% of the total condos/apartments bought in the period, while foreigners (mainly Permanent Residents) bought 93 landed homes, only 8.4% of the total of 1,108 landed homes purchased.

While buyers from Indonesia and Malaysia remain the dominant players in the current market, the share of the top-five nationalities (68%) continued to slide, a trend that started in 2005. “This shows that private residential properties are attracting interest from other nationalities and that Singapore is becoming more international,” points out Ong Choon Fah, Executive Director at DTZ Debenham Tie Leung.

Developers are also reporting anecdotal evidence of the increase in these new buyers. At the launch of luxury boutique development Parkview Éclat, foreigners represented 83% of buyers, with some South Asian owners, the second-largest group of buyers, taking on more than one unit, said Eddie Chow, a Senior Executive at the Hong Kong Parkview Group.

Spreading the message
To cater for this wider international demand, developers are now going further afield in their road shows and spending top dollar on their show flats. Kan Kum Wah, Head of Residential Marketing for Marina Bay Financial Centre, revealed that this year’s current marketing plans include exhibitions and talks at luxury property conferences in Hong Kong (twice), Shanghai and Dubai, to build interest and awareness ahead of their second residential tower planned for later this year or early next year. When the Marina Bay Residences’ first tower was launched last December, around 40% of the buyers were from overseas.

Kan said the presence of this new type of buyers was to be expected given the rapid expansion of the banking and financial sector due to Singapore’s growing reputation as a financial hub. He also pointed to a new trend, also evidenced in Parkview Éclat: the rise of the multiple home owner.

“These buyers typically own multiple homes in multiple destinations,” Kan said. “I envisage the buyers of high-end developments in Singapore owning homes in other vibrant cities like Hong Kong, Shanghai, Tokyo and Dubai. These buyers are attracted by location, being near leisure and business districts, as well as quality and exclusiveness. Price is not the major concern with this type of buyer, and many are prepared to write blank cheques up to a pre-arranged price.”

Foreign investors are not only buying for investment but also to live in, property experts point out. Ong noted that foreigners have become more active in the resale market where they now account for 32% of resale apartment transactions. Unlike new projects, these homes are usually ready for lease immediately. Tay anticipates buying interest from foreigners will grow from strength to strength in the coming years.

“Singapore’s journey as a global property market has just only begun,” she said. “As such, we believe that to date, only a small fraction of the world’s high net worth individuals have invested in Singapore’s residential property market. We’re of the opinion that as Singapore’s reputation as an attractive country for investment, particularly due to our economic makeover, reaches out to an even wider global market, more foreigners can be expected to purchase residential properties in Singapore.”