Strong Singdollar, stringent stamp duty scare off foreign property buyers

SINGAPORE — Even while transaction volumes in the housing market continue to pick up, foreign demand for homes in the Republic has been muted, largely as a result of the strengthening Singapore dollar and the Additional Buyer Stamp Duty (ABSD).

With an improving economy and persistently low interest rates, developers in Singapore sold 7,147 private homes in the first seven months of the year, 50 per cent higher than in the corresponding period a year earlier.

Meanwhile, the proportion of buyers from abroad fell last year to a four-year low — and has stayed at that level this year, data from property firm Cushman & Wakefield showed Tuesday (Aug 29).

Foreign buyers accounted for just 6 per cent of purchases in the first half of this year, down from 9 per cent in 2013, when home prices began to fall from record highs following the imposition of loan curbs through the Total Debt Servicing Ratio framework.

Local buyers, on the other hand, snapped up about 72 per cent of new homes sold by developers in the first six months of the year, with permanent residents (PR) and companies accounting for the remaining proportions of about 15 per cent and 6 per cent, respectively, the data showed.

Chinese nationals formed the largest group of foreign buyers in the first half of this year, accounting for 29 per cent of home purchases, unchanged from four years earlier, the Cushman & Wakefield data showed.

However, the proportion of Malaysian buyers fell to 21 per cent from 26 per cent over the same period, while the proportion of Indonesian buyers slumped to 6 per cent from 17 per cent.

Mr Desmond Sim, head of research at CBRE Singapore and South East Asia, said: “Although Chinese buying is steady, overall foreign buying is on a decline for several reasons. While the stringent stamp duty is certainly one of the key entry barriers, for Malaysian and Indonesian investors, a stronger Singapore dollar makes property a bit expensive here.”

As part of the many rounds of measures introduced since 2009 to cool runaway housing prices, the Government imposed the ABSD in December 2011, with a rate of 10 per cent for foreigners.

This ABSD rate for foreign buyers was raised to 15 per cent in January 2013. Meanwhile, over the last four years, the Singapore dollar has risen about 25 per cent each against the Malaysian ringgit and Indonesian rupiah to 3.1560 and 9,870, respectively.

Ms Christine Li, research director at Cushman & Wakefield Singapore, said: “It takes time for traditional buyers such as Malaysians and Indonesians to come back given the depreciation of their home currencies.

“Going forward, Chinese buyers will be more inclined to buy in other markets such as Hong Kong and Australia because these markets allow PR status to foreign residents after they have lived in the country for a certain period.”

Singapore private home prices have declined 12 per cent since 2013 after dropping for 15 straight quarters, the longest streak since the data was first published in 1975. AGENCIES, WITH ADDITIONAL REPORTING BY RUMI HARDASMALANI