4 Types of Buyers That are Driving Up Singapore Property Market
Do you know that Singapore property buyers come from everywhere in the world and Singapore’s property market is considered one of Southeast Asia’s best and safest long-term investments? After all, we are known to be a financial hub, and there are many other reasons why people simply love purchasing properties in Singapore. In fact, as you can see from the graph of Singapore’s private property market trendline below, the total number of transactions has actually hit close to 30,000 in 2021.
At the same time, in the first half of this year, it hit more than 19 thousand transactions! Not to mention, the price of property transactions has increased by close to 25% over the last five years, and there’s a lot of transactions over the last two years.
But with all these statistics, you might be wondering – where exactly are the demands for properties coming from? Well, look no further than this article as we explore what and who exactly supply the demand for properties in Singapore.
HDB Upgraders
It goes without saying that everyone, including you, would want to upgrade to a better lifestyle and stay in a private property with a swimming pool! And this is actually one of the reasons for the demands of properties – from HDB upgraders.
To better understand this factor, let’s look at the graph above. If you were to take a closer look at the difference between 2018 and 2019, you will notice that there are 13,000 new MOP HDBs in 2018, and 26,000 newly Mop HDBs in 2019. That’s double the amount in 2018!
So, if we were to look at the last five years consistently from 2019, you will also notice that there are 30,000 new Mop HDBs entering the market in 2022. And this group of people have made a profit from their HDB or BTO, and they are actually looking to upgrade their lifestyle.
But what exactly does all this mean? Well, it simply highlights the extremely strong demand for properties right now. With that said, it is also important to know about the trend of transacted properties in Singapore. The transacted properties are the green-coloured graph proportions, and as you may notice, there are only 4800 units that have bought the hidden private properties this year.
What all this shows is how there are numerous people who are ready to sell their HDB, and at the same time, the number of people who have yet to upgrade their properties is not there yet. Essentially also indicating that we will see there will be more HDB upgraders in the near future.
Permanent Residences
The second group of private property buyers are the permanent residents (PR) in Singapore. In the past, many PRs do not purchase properties in Singapore because they are unsure if they will they be renewing their PR or not.
However, this is not the case now! In fact, an increasing number of PRs are looking to purchase a property in Singapore. And why is this so? Take a look at the graph above. In the past, the average rental price was relatively lower. Specifically, in 2018, it was roughly around $3.20 per square foot per month. However, it has since risen about 22% in rental fees, where it is currently $3.96 per square foot per month.
Because of this significant 22% increase in rental cost, which is caused by inflation and low supply of rental apartments, more and more PRs are looking to purchase a property in Singapore instead.
Private Property Owners Looking to Upgrade
Next, we have the third group of private properties buyers which is the private property owners themselves. In this case, such private property owners look to upgrade to either a bigger unit, a lender, maybe a newer development, or simply to decouple and buy multiple properties for investments.
Foreigners
Last but not least, we have the last group of private property buyers – the foreigners who want a place to stay in Singapore.
Now, in the past few months, you may have seen news (such as the one above) about some foreigners who are buying multiple properties in Singapore. They are even willing to pay almost 30 million over of taxes to the government. And while it may seem surprising to hear increasing number of foreigners paying so much for properties in Singapore, you might be even surprised to know the number of unreported foreigners who purchase private properties in Singapore.
For the past few months or even the one year itself, I have actually received much more inquiries about buying properties from foreigners.
One of the main challenges that foreigners face when purchasing properties in Singapore is that they need to pay for the additional tax ABSD of 30%. Of course, this is something all foreigners try to avoid, and to be honest with you, there are some ways and methods in which they can actually avoid paying this taxes.
But why exactly are foreigners so interested in buying properties in Singapore? This is because not only is Singapore a tax haven but we also have world class infrastructure and is a well-known business hub. And therefore, foreigners love to relocate into Singapore to set up their home office or to set up a business hub in Singapore itself. Not to mention, Singapore has top-notch infrastructure that attracts foreigners to build their lives here.
For instance, we have world class healthcare and education. So, these are the two main reasons why PRs want to come into Singapore (and hence need to buy a home to stay in).
But where are the foreigners from? For the past 10 years or so, the majority of them actually comes from Malaysia and Indonesia. But right now, there are increasing number of foreigners from China.
In fact, I would honestly say that 80% of them actually comes from China. We also have a few foreigners coming from Taiwan and also the US. But why China? This is because many Chinese foreigners believe that China properties and political system are currently extremely unstable. Therefore, they rather put it into Singapore where the political system is much more favorable for them.
Summary
To sum it up, factors such as inflation, demand of resale HDB which is caused by the shortage of BTOs, supply of newly MOP HDB, and the uncertainty in China have all contributed to the rising demand for properties in Singapore.