Foreigners' share of private home buys seen shrinking in first half

Foreigners' share of private home purchases in Singapore is expected to decline in the first half of this year, given the harsher additional buyer stamp duty (ABSD) rates imposed on them under the recent property cooling measures, say property consultants.

Last year, foreigners who were not Singapore permanent residents (PRs) accounted for just 6.3 per cent of all private home purchases on the island - the lowest proportion since 2003 and a significant drop from the 17.6 per cent share in 2011.

The record low proportion is a reflection of reduced foreign buying interest arising from higher (transactional) cost, with the introduction of 10 per cent ABSD on all residential property purchases by non-PR foreigners starting Dec 8, 2011.

And with the ABSD rate for this group jacked up to 15 per cent since Jan 12 this year.

PRs' share of private home purchases increased from 13.4 per cent in 2011 to 15.8 per cent last year. This is attributed to first-time PR home buyers being spared the ABSD rod last year. However, things have changed. Since Jan 12, PRs have to pay 5 per cent ABSD even on their first Singapore home purchase, and 10 per cent for any subsequent purchases.

Based on caveats lodged, Singaporeans acquired 24,815 private homes last year, up 17.7 per cent from 2011. The number of private homes bought by PRs increased 20.6 per cent to 5,086, while that purchased by non-PRs slipped 63.2 per cent to 2,038.

Despite mainland Chinese overtaking Malaysians as the top foreign buyers (including PRs) of private homes in the fourth quarter of last year with a 24.4 per cent share, Malaysians posted the lion's share on a full-year basis. They accounted for 26.1 per cent of caveats lodged by foreigners last year (including PRs), followed by mainland Chinese (22 per cent) and Indonesians (19.4 per cent).

Although the number of caveats Malaysians lodged declined 3.9 per cent to 1,858 last year, the drop is the smallest among the top four nationalities of foreign buyers. The number of caveats lodged by mainland Chinese buyers slipped 42.1 per cent to 1,570 last year. Caveats lodged by Indonesians declined 22.4 per cent to 1,382, while those from India citizens fell 18.4 per cent to 927.

For Q4 2012, mainland Chinese bought 421 private homes (one more than in Q3) - placing them ahead of Malaysians, with 382 caveats. This put the mainland Chinese share of the foreign buying pie at 24.4 per cent and that for Malaysians at 22.2 per cent in the October-December period.

Among the pool of private homes acquired by foreigners including PRs, the proportion of homes located in the suburbs, or Outside Central Region (OCR), has been picking up in recent years. Last year, OCR accounted for 55 per cent of the 7,124 private homes bought by foreigners, up from a 49 per cent share in 2011 and 39 per cent share in 2010.The trend reflects a shift in foreigners' focus to more affordably priced suburban homes following the ABSD's introduction in late 2011. Furthermore, it predicts this OCR share will rise by up to 5 percentage points this year, given that the high-end market has become relatively less attractive as an investment asset or accommodation choice following the latest round of ABSD rate hikes.

Market watchers also note the larger trend of developers rolling out more projects in OCR over the past few years on sites sold at state tenders. Against this backdrop, the OCR proportion among private homes purchased by Singaporeans has also climbed from 51 per cent in 2010 to 62 per cent in 2011 and 65 per cent last year. This too could rise by up to 5 percentage points in 2013,.

Source: Business Times –23 January 2013