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Is Singapore’s Property Market Still Worth Investing?
Perspective | 26 March 2010
By: Xavier Lim
Articles (51) Profile
By: Jade Lee
Articles (97) Profile

Macau, the ‘Sin City’ of the East, shares similarities with Singapore in terms of land scarcity and buoyant gaming industry. Given the cities’ high density real estate crammed onto a tenuously small tranche of dry land, property investment is an alternative in Macau and Singapore. Macau’s real estate market has seen prices doubled from 2004 to 2007 predominantly due to the popping up of new casinos. This ‘casino effect’ has helped to increase demand, especially that of foreigners, for housing at the luxury end, thus accelerating the upward movement of luxury property values in Macau.

Similarly, the Singapore property market is also witnessing soaring prices due to the ‘casino effect’. Ever since Las Vegas Sands won the tender to build an integrated resort (IR) at Marina Bay, and Genting International won the rights for a second IR on Sentosa Island, the local property market has attracted buyers from neighboring countries. These investors are likely to buy in order to rent out to expatriates and tourists brought in by the IRs. This can be seen from the number of units sold by developers in January this year, which was three times more than that of December 2009. It was also the highest monthly total since September last year.

As a result, another slew of measures to cool the local private property market was recently pushed out by the government. This time, they have introduced the seller’s stamp duty, which involves owners paying another round of stamp duty of around 3% on the sale of the private property if the sale is made within 12 months of purchase. In addition, the loan-to-value limit of bank loans, excluding HDB loans, is lowered from 90% to 80%.

These measures came not too long after the government had removed the interest absorption and interest-only schemes that allow home buyers to defer mortgage payments until the property has been fully built, aiming at restoring stability to a property market that is booming amid a recessionary environment last September.


Casino-driven property prices

The government did not forget to curb speculative buying and selling of public housing either. New rules unveiled stipulate that non-subsidised HDB resale flats buyers must now occupy their flats for at least three years before they can sell them – this is up from two and a half years for buyers with HDB loans and one year for buyers with bank loans or no loan. However, HDB loans will still maintain the 90% loan-to-value limit.

Property Prices Maintain Uptrend
Accordingly to CLSA Asia-Pacific Markets, the casino industry in Singapore is projected to rake in $3 billion revenue this year and $6 billion by 2013. Some experts expect the 2 IRs to attract tourists and high rollers from Thailand, Malaysia and Indonesia due to their close proximity to Singapore. Moreover, the lower blended gaming taxes of 8% to 9% enable the 2 IR operators to offer better incentives to the high rollers in the region. The Singapore Tourism Board is ambitiously aiming to draw in 17 million visitors and triple annual tourism revenue to $30 billion by 2015.

These will definitely help to boost revenue for hotels and the retail sector, which will in turn create more job opportunities and increase population due to more foreign talents coming in, resulting in an increase in permanent residents and citizens. Therefore, we believe that the residential property prices are likely to rise by approximately 10% per annum for the next few years due to an increasing population and robust job growth.

Bubble Unlikely To Form
Will these government measures be able to cool down the property market? Yes, probably in the short-term. Is a bubble forming in the property market? Not likely, as we believe that in the long run, all these measures will help to support the property prices.


Government measures benefit investors in long-run

Let us do a simple comparison. A bungalow located on Ocean Drive, Singapore sold for a record of $30 million in October 2009. However, in Hong Kong, a duplex, about a third of the size of the aforesaid bungalow went for almost 3 times as much in the same month. This tells us that property prices in Singapore are actually not increasing as aggressively as what we think it is.

In addition, more than 130 apartments around Singapore’s Marina Bay and 900 apartments at Sentosa Cove are yet to be put on sale. Moreover, there are about 11,000 condominiums and apartments in the prime districts, or two-fifths of the total supply in Singapore, which will come onto the market over the next three years, according to Savills. This hugely overshadows the 1,260 luxury homes expected in Hong Kong over the same period.

Therefore, with the government’s efforts in making sure that there is adequate supply of housing to meet demand, we believe property prices in Singapore will continue to increase gradually, driven by fundamentals rather than sentiments.

This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.


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The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

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