1. Indian interest in Singapore real estate rising; Here is where to invest for good returns

Indian interest in Singapore real estate rising; Here is where to invest for good returns

After slowdown in 2015, when the market appreciated with a modest 2%, real estate sentiments in Singapore continues to show signs of recovery.

New Delhi | Published: October 3, 2016 3:51 PM
The recent correction in the Singaporean market is not a product of market forces but deliberate government measures to cool down the market (PTI) The recent correction in the Singaporean market is not a product of market forces but deliberate government measures to cool down the market (PTI)

After slowdown in 2015, when the market appreciated with a modest 2%, real estate sentiments in Singapore continues to show signs of recovery.

“Although cautious investment is the lexicon, when it comes to real estate investment in the city, the real estate sector in Singapore can offer ample opportunity for investors who are looking for a long term capital gain & rental yields” Said Tanuj Shori, CEO, Square Yards.

The recent correction in the Singaporean market is not a product of market forces but deliberate government measures to cool down the market, as the market surged significantly before & after recession, with a 34 per cent appreciation registered between Q2 2009-10 alone

As a consequence, the government has to step in with a slew of steps such as, lowering LTV ratio and introducing Seller’s Stamp Duty (SSD) & Additional Buyer’s Stamp Duty (ABSD) to rein in market overheating. The outcome has been favorable, with the government able to arrest the overheating of market in the recent times.

Bottoming Out Market Sentiments

In 2015-16, positivity has started emerging back in the Singapore real estate market. Amidst a careful investment scenario, new asset classes are emerging that is attracting investor attention. Singapore also has a decent rental market. Although there has been a dip in rental rates, residential markets in Singapore can still fetch a yield in tune of 2.5 to 3 per cent. Micro-markets like Sembawang, Queenstown & Pasir Ris can ensure relatively higher rental yields, driven by surge in demand & larger labor markets.

MAJOR MICROMARKETS Price/ Sq. Ft

(USD)

Rental Yields
Woodlands

290

2.4%

Sembawang

570

3%

Bukit Panjang

269

2.5%

Yishun

841

2.9%

Bukit Batok

925

2.6%

Jurong West

967

2.7%

Queenstown

1059

3.1%

Bulkit Merah

1103

2.8%

Toa Payoh

1105

2.8%

Bishan

1124

2.7%

Hougang

1294

2.9%

Pasir Ris

1,389

3%

Tampines

701

2.8%

Source: Square Yards Global Intelligence Cell

In the sales transaction space high end market with ticket size over, SGD 8 Million (USD 5.9 Million) are witnessing higher demand. Nevertheless, due to the Additional Buyer’s Stamp Duty (ABSD) of 15% on international investors, markets have suffered. Many luxury real estate developers & marketers believe that had the ABSD not been levied, the inventory turnover could have received more momentum.

But in spite of the ABSD, the city has lot to offer. At the end of the day, the fact cannot be forgotten that Singapore is a truly global city. In a time when the geopolitical crisis across the globe is mounting further, Singapore with a stable politics & cosmopolitan cultural appeal offers a safe haven to park their investment for the international investor community.

The office market in Singapore has also been performing well in the past, especially Grade-A spaces in Central Business District, driven by flight to quality & tightened supply in the recent times. With limited space Grade-A space in CBD, investors are also looking forward to other office asset classes in non-CBD areas.

KEY REAL ESTATE PARAMETERS

Mortgage Rate 1.8%
LTV Ratios 65%
Major Banks OCBC Bank, CIMB Bank, RHB Bank, UOB

Transaction Cost

15%
Average Capital Appreciation (2015) 1-3%
Average Rental Yields 2.5 to 3%

Positive Future Sentiments

The emerging real estate sentiments in Singapore capitalizes on stronger economic growth potential of the city & expansion in its labor markets,

After an inflation rate of 2.4 per cent and 1 per cent respectively in 2013-14 respectively, the present rate of inflation has come down to 0.5 per cent. It has also successfully arrested the rate of unemployment, with the present rate estimated at 2.6 per cent for Q1 2016, a considerable decrease from 3 per cent in Q4 2015. The construction sector is expected to grow by 3 per cent in 2016, outperforming the overall GDP growth rate of the country, that is estimated to grow at 2.1 per cent in 2016.

A surge in activity in Singapore’s construction sector coupled with improving economic fundamentals can give some further push to the real estate sentiments of Singapore. The Singaporean Market might be headed for a more robust recovery in 2017, which should be followed with increase in both global & domestic investments.

The surge international investment will also witness substantial share of investment from the Indian community, as the recent capital appreciation and geographical proximity had made Singapore, one of the favorite among Indian investors. Along with professionals and business owners, large number pf seasoned investors are looking forward to make property purchase in Singapore. In a time of global geopolitical tensions and poor performance by various international financial markets, Singapore political stability & well-regulated economy will be additional impetus for Indians to make investment.

Tanuj Shori

The author is CEO and Founder, Squareyards.com

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