City&Country: Offshore-- Malaysians overtaken as second-largest overseas buyers in Singapore

The Chinese have overtaken Malaysians as the second-largest overseas buyers in Singapore’s residential market, despite the Singaporean government introducing measures aimed at cooling down the market.

International property consultancy Jones Lang LaSalle says that in 1Q2011, Chinese and Malaysian buyers bought more than 50% of the flats sold in Singapore’s prime residential areas.
Indonesian, Chinese and Malaysian buyers accounted for 24%, 16% and 14% of the sales respectively, it says.

But the Chinese made up the majority of the buyers who spent S$5 million (about RM12 million) or more on residential property in central and prime markets and, in 1Q, 31% of the 54 homes worth S$5 million or more were sold to Chinese buyers.

“The surge in Chinese buyers in Singapore coincides with the policy tightening in China. We expect the number of Chinese buyers to stay at a healthy level as seen in previous quarters, as the fiscal and monetary policy in China remains conducive to overseas investment by the wealthier Chinese,” says Dr Chua Yang Liang, head of research and consultancy at Jones Lang LaSalle’s Singapore office.

Since Beijing introduced limits on home purchases, Chinese who have been barred from buying third properties at home have had to go to overseas markets to expand their property investment portfolios.

Although Singapore, like Hong Kong and the Chinese mainland, has tightened borrowing limits and introduced a hefty stamp duty to penalise short-term speculators, demand from the Chinese mainland has remained strong.

Chua says that the Chinese buyers are motivated by the fact that many have children studying in Singapore.

Singapore house prices rose 2.1% in 1Q, after 2.7% growth recorded in 4Q2010. Last year, private home prices rose 17.6% despite government attempts to cool the market.

Since January 2010, institutional and corporate buyers of residential properties in Singapore have been restricted to borrowing up to 50% of the purchase price of properties, down from 70% before. The loan-to-value ratio has also been lowered from 70% to 60% for individual buyers who already own one or more properties.

A 16% levy will be charged for buyers who resell their homes within 12 months of purchase.
“The anti-speculative policy has had some impact in cooling down the market. But there is still demand in the market, particularly from long-term investors,” Chua says. He expects Singapore home prices to remain flat or grow by 5% to 6% at most this year.

Orchard Turn Developments Pte Ltd, the developer of a completed luxury residential project called Orchard Residences, is expected to test market sentiment when it releases the remaining 18 flats on sale in the project for S$4,000 psf and higher. Ninety per cent of the the project’s 175 flats have already been sold.

Soon Su Lin, chief executive of Orchard Turn Developments, a joint venture between SHKP and CapitaLand, says the cooling measures are targeted at speculators who buy two or three flats for short-term gain.

“Our buyers are mostly mid- to long-term investors,” she says. Four penthouses, ranging from 4,200 to 5,000 sq ft each, have been sold, she says. One was sold to an international buyer for S$5,600 psf, setting a record for Singapore condominium projects.

Soon says international buyers account for half the sales at the 56-storey project in Orchard Road, the city’s busiest shopping street.

Jimmy Wong, executive director of Sun Hung Kai Real Estate Agency, says the residential property will become a new benchmark in the Orchard Road area.

He says that the remaining flats are located above the 40th floor and command spectacular views. In 2007, the average price for flats above the 30th floor was S$3,705 psf.

Orchard Residences is part of the retail-residential Orchard Turn Development, which is being undertaken at an investment cost of more than S$2 billion. — SCMP

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 855, Apr 25-May 1, 2011