Foreign buyers return to property market in April, after Q1 pullback

by Albert02

Foreign buyers return to property market in April, after Q1 pullback

Foreign buyers return to property market in April, after Q1 pullback. Private house purchases by overseas purchasers are likely to pick up steam when quarantine-free travel returns, while economists warn that headwinds such as economic uncertainty and currency volatility should be kept in mind.

Non-landed private home sales by foreign buyers virtually half after a new round of property cooling measures were announced in December, according to statistics compiled by OrangeTee & Tie, from 277 units in Q4 2021 to 146 units in Q1 2022. Foreign buyers must now pay a 30% Additional Buyer’s Stamp Duty (ABSD), up from 20% before, as part of the efforts to temper the red-hot property market.

“Some buyers may have been deterred by the increased taxes and larger cash outlay,” Christine Sun, OrangeTee’s senior vice-president (research & analytics), stated.

Other factors that contributed to the drop in transaction volumes, according to Nicholas Mak, ERA’s head of research and consultation, include geopolitical uncertainties, rising interest rates, and a lack of large launches.

Meanwhile, Edmund Tie’s head of research and consultancy, Lam Chern Woon, pointed to the Omicron outbreak, which peaked in January and February before subsiding.

However, international buyer transactions increased in April as Singapore eased pandemic-related measures such as border restrictions. Foreigners acquired 93 non-landed private residences in April, up from 51 in March and beating the monthly average of 83 purchases from January to March 2022. Both the primary and secondary markets are represented in the statistics.

For example, sales at Frasers Property’s Rivière at Jiak Kim St quadrupled from 8 units in March to 35 units in April, according to Lam. In April, foreigners purchased 11 units, compared to zero in March. “With the increase in the ABSD rate, some foreigners may be shifting their purchases to the Rest of Central Region (RCR) to meet their budget,” Lam said.

Edmund Tie has noticed an increase in the number of American buyers among foreign buyers, some of whom are newly minted American citizens from other countries, as interest rates rise. Because of a Free Trade Agreement, US citizens have the same stamp duty treatment as Singapore residents.

Mak, on the other hand, cautioned that it was too early to say whether the increase in foreign buyer transaction volumes will be sustained because he believes foreign buyers will need more time to digest the cooling measures before returning.

“Non-permanent Residents (PRs) working here are awaiting approval of their PR status before purchasing private properties,” Mak continued. “The ABSD is too high for them.”

The statistics revealed that in March and April, compared to January and April, there was an increase in purchases from Malaysia and India, possibly due to the reopening of the Causeway. However, Chinese purchasers maintained their lead among foreign buyers in terms of volume, with 79 units transacted in April. Buyers from Malaysia, India, the United States (US), and Indonesia followed.

Non-landed residences bought by foreign buyers in Q1 2022 were mostly in the Core Central Region (CCR), as these buyers choose luxury homes. Foreign buyers in the suburbs had the largest drop in transactions, down 60% year on year, as the increased ABSD impacted affordability. The CCR’s transaction volumes decreased.

Piccadilly Grand, a 407-unit development on Northumberland Road, sold 77 percent of its units at an average selling price of S$2,150 per square foot at its inauguration this month (psf). 90% of the customers were locals, with the remaining 10% made up of PRs as well as foreigners from China, India, Malaysia, the United States, Hong Kong, and Indonesia.

Lee Sze Teck, Huttons’ senior head of research, has noted an increase in international interest since April, and says Indonesians have closed “a lot of acquisitions” in premium districts 9 and 10.

“Despite the pandemic and cooling measures, foreigners’ budget is unchanged, and in certain cases, even higher,” Lee remarked. The main challenge is locating large floor plate components, which are in short supply.”

Sun anticipates more foreign buyers to return to the market in the future, however the increased ABSD may mean the absolute number will not match pre-pandemic levels. “Property prices are growing in other sophisticated cities as well,” Sun said, “so some purchasers may still find residences here appealing despite the increased ABSD.” She did, however, mention variables including a difficult macroeconomic environment and currency swings, which could reduce income and investment returns.

As long as quarantine-free travel is allowed, Lee believes that the number of overseas transactions will increase this year, maybe aided by a flight to safety as the Russia-Ukraine conflict continues. This year, international purchasers are expected to account for around 5% of overall sales, according to Lee.

In the face of mounting headwinds, Mak believes that non-PR demand for private residences will account for fewer than 5% of overall sales in 2022, with PR demand picking up the gap at 15-20%. Singaporeans are thought to make up the majority of the balance.

Meanwhile, Lam anticipates a “gradual firming” of foreign demand as tourism recovers and inflationary pressures increase the appeal of real estate as an inflation hedge. As a result, over the next 12-24 months, the percentage of foreign demand should return to its pre-pandemic level of 6%, he said.

The implementation of a 35% ABSD rate on any residential property transferred into a living trust, according to analysts contacted by The Business Times, will have a minimal impact, but it may generate some ambiguity in the short term. The government said on Sunday (May 8) that the ABSD must be paid in full at the time of the transfer, but that a trustee may request a return.

 

Click the image to read the full details of report or at this link:
https://www.businesstimes.com.sg/real-estate/foreign-buyers-return-to-property-market-in-april-after-q1-pullback


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