BankBazaar Singapore – January 22, 2018
Singapore: The Bank of Singapore expects private home prices to increase 3% to 4% and rents to rise from 5% to 10% in 2017 as overseas interest in local market rises and collective sales trend continues.
In a report published, Elis Lee, head of strategy at the bank, indicated that the improved market outlook and affordability of properties compared to those in other major cities should help attract foreign interest, reports The Business Times.
Singapore’s residential market has largely remained dull since hitting a peak in 2013 but things have begun to pick up in 2017. The uptick, however, has so far been due to domestic demand. Lee expects this to change as demand from overseas buyers increase.
Overseas customers had made only around 1,600 transactions last year below the long-term average of 2,200. A major reason attributed to their lack of interest is the introduction of 15% additional buyer stamp duty (ABSD) on foreign buyers.
The government had introduced ABSD in 2011 and raised it two years later. Although it had made Singapore a less attractive destination for overseas property investors then, other countries like China have since taken steps to tighten local markets. With property prices rising at a rapid rate in cities like Hong Kong, buyers are now expected to return to Singapore.
Lee further added that the rental market appears to be about to bottom out as fewer launches in the recent years bring down the rate of completions. Oversupply has hurt the country’s rental market in recent years. Between 2014 and 2017, about 50,000 new residential property units were launched, increasing rate of vacancies to 8% last year from 5% in 2013.
With a renewed interest from foreign buyers, properties at the top end of the spectrum could enjoy strong demand. This segment relies heavily on overseas investment and the recent changes in the market have brought the prices to a multi-year low.
However, not everyone is convinced that affordability alone would attract foreign customers. Reports suggest that Desmond Sim of CBRE Research expects ABSD to remain a hurdle as investors may try to wait out and see if the stamp duty rules may be eased at a later stage. Foreign investment could still increase, according to Sim, but may not see a sharp rise.