Should Foreigners invest in Singapore Properties?

 

Should Foreigners invest in Singapore Properties?

Singapore has long been a magnet for savvy investors especially the Ultra-High Net Worth Individuals (UHNIs), wooed by the Southeast-Asian city-state's stable politics, strong currency and reputation as a safe haven to park assets. While the country offers investors a myriad of investment options and platforms, Singapore’s real estate remains one of the most lucrative options when it comes to investing in this land-scarce island nation. With an ever-growing population of local and overseas talents, limited land supply which only measured 710 square kilometres makes real estate a priced asset to own.
 
Since its founding and independence in 1965, this young nation thrived and emerged one of the smallest but most successful sovereignty in modern history. With a GDP per Capita expected to reach US$ 61,000 by the end of 2022 (according to Trading Economics global macro models and analysts’ expectations), Singapore's property prices have also accelerated accordingly. As Singapore’s economy continue to grow, the demand for residential and commercial spaces increases resulting in property prices rising over time. Despite the recent Global Covid 19 pandemic, global bank Morgan Stanley assessed that property prices in Singapore will double by 2030. When translated, this means that a prime property bought today could be sold for a much higher price in 2030 given Singapore’s rapid economic growth that continues to beat economic forecasts.
 
 
Investing in property requires much deliberations and considerations of a wide spectrum of underlying macro and micro factors but with the right mindset and strategy, selecting the right country can bring huge return-on-investment.
 
The following reasons underlined why investing in Singapore’s real estate can be extremely rewarding, much lower financial risk as compared to other countries and investment platforms.
 

1. Singapore’s Political Stability, Pro-Investors Policies

 
 
Singapore’s property market is showing far greater resilience on the global stage despite concerns about slowing economic growth both regionally and globally. One reason for this is an influx of foreign investors especially Chinese nationals and Asian investors who account for the largest number of non-resident homebuyers in Singapore.
 
The island nation is deemed politically stable, free from natural disasters and its real estate is perceived as a sound investment by many worldwide. The comparative stability of Singapore versus its regional peers, along with its attractive income tax rates, seemingly makes the tax on foreigners owning property worth paying.
 
Singapore is international acclaimed for its governance transparency, political stability and ease of doing business - factors that people look for in an investment destination. Moreover, government policies in Singapore support the creation and growth of industries and businesses, including the start-up ecosystem.
 
The government devised a series of pro-investors policies which seek to benefit both the island nation and foreign investment. The Global Investor Programme (GIP) accords Singapore Permanent Resident status (PR) to eligible global investors who intend to drive their businesses and investment growth from Singapore.
 
Its stable and capable government also ensures socio-political stability through an efficient and legal infrastructure and judiciary system. This global city is also an investment and tax-friendly country with no capital gains tax and estate duty, making it a welcoming country for foreign investors.
 
Other than being one of the fastest growing economies in Asia, Singapore also offers vibrant and attractive real estate investment opportunities in absolute financial sense.
 

2. The Sing Dollar – A Global Winning Currency

 
Singapore is one of a few countries in the world with a triple-A sovereign credit rating, strong current account surplus and positive foreign currency reserves which make the island nation a safe country for foreign investors. In 2022, the Singapore dollar established itself as Asia’s most resilient currency against the US dollar and some strategists are betting on more strength if price pressures force the nation’s central bank to tighten its exchange-rate policy again next month.
 
A stronger currency helps absorb some of the inflation that seeps in with imported goods and raw materials. Imported inflation is the biggest source of price gains in Singapore, which virtually buys everything it consumes from overseas. Singapore dollar is a safe haven for investors with currencies that are less resilient and greatly reduce the forex exchange risk involved. This critical factor preserves foreign investors’ long term capital gain and ensure high return-on-investment with relatively low foreign exchange unlike many other ASEAN countries which may see the property values erode over time with a weaker currency.
 
 
Singapore’s central bank, the Monetary Authority of Singapore (MAS) uses the Singapore dollar nominal effective exchange rate — referred to as S$NEER — policy band to keep inflation in check. While most other countries in Asia use interest rates as a main policy tool to manage inflation. MAS employs the S$NEER to achieve medium-term price stability as the country has a small and open economy which may be susceptible to any financial turmoil on the global stage. The proactive and forward-looking strategy adopted by the Singapore government to protect its currency offers real estate investors’ return-on-investment with capital preservation and greatly reduced potential FOREX risk affecting property values.
 

3. Singapore Property Price Index – Perpetual Upward Trend

 
According to a Cushman and Wakefield report, Singapore's real estate market has attracted around $26.9b in investments in the first nine months of 2022 which was 3.0% higher than the total investment volumes registered for the whole of 2021.
 
Non-landed private property in Singapore continued to experience strong demand and rising prices in Q3 2022, after a strong showing in Q2 2022. Despite the new cooling measures implemented in December 2021, Singapore’s Urban Redevelopment Authority (URA), the national urban planning authority of Singapore, and a statutory board under the Ministry of National Development of the Government of Singapore data for Q2 2022 revealed that prices of non-landed private residential properties increased 3.6% quarter-on-quarter.
 
Notably, prices of non-landed properties in the Core Central Region (CCR) rose by 1.9% from Q1 2022 to Q2 2022, after a 0.1% decrease was observed from Q4 2021 to Q1 2022. Similarly, prices of non-landed properties in the Rest of Central Region (RCR) grew 6.4% quarter-on-quarter, bouncing back from the 2.7% quarter-on-quarter decline in the previous quarter.
 
Long seen as a safe haven, Singapore's properties have remained resilient through the Covid 19 pandemic with the Urban Redevelopment Authority's benchmark overall private home price index rising 13 per cent over the past 2 years. Global markets are in turmoil and macroeconomic uncertainty is escalating on the back of the Russia-Ukraine war and rising inflation. This has pushed the global elite to search for safe havens to park their wealth and diversify their assets.
 
 
Singapore’s economic stability and rule of law make it a popular choice for ultra-rich foreign buyers. Although a new raft of cooling measures was implemented in December 2021, the prospect of paying higher Additional Buyer’s Stamp Duty (ABSD) rates is not much of a deterrent for the super-rich and foreign investors. Singapore property market presents as a safe haven for capital preservation far exceeds the downsides of increased ABSD rates and the foreigner’s 30% tax is considered to be “just another part of a transaction cost to be factored in”.
 
Local demand for investment property has remained high throughout most of the COVID-19 pandemic. Pessimism about the affordability of housing in the future, as well as the desire to purchase an investment property before prices rise further are some factors fuelling prices in the non-landed private property markets.
 

4. Pro-Investor Legal System

 
Singapore maintains an open, heavily trade-dependent economy that plays a critical role in the global supply chain. The government utilised unprecedented levels of public spending to support the economy during the COVID-19 pandemic. Singapore supports predominantly open investment policies and a robust free market economy while actively managing and sustaining Singapore’s economic development. Foreign investors and corporates regularly cite transparency, business-friendly laws, tax structure, customs facilitation, intellectual property protection, and well-developed infrastructure as attractive investment climate features.
 
Singapore actively enforces its robust anti-corruption laws and typically ranks as the least corrupt country in Asia. In addition, Transparency International’s 2020 Corruption Perception Index placed Singapore as the fourth-least corrupt nation globally.
 
Singapore’s legal framework and public policies are generally favourable toward foreign investors. Foreign investors are not required to enter joint ventures or cede management control to local interests, and local and foreign investors are subject to the same basic laws. Apart from regulatory requirements in some sectors (see also: Limits on National Treatment and Other Restrictions), eligibility for various incentive schemes depends on investment proposals meeting the criteria set by relevant government agencies. Singapore places no restrictions on reinvestment or repatriation of earnings or capital. The judicial system, which includes international arbitration and mediation centres and a commercial court, upholds the sanctity of contracts, and decisions are generally considered to be transparent and effectively enforced.
 
Singapore remains the best place in the world to do business in the next five years, according to EIU’s business environment rankings (BERs) for the fourth quarter of 2022. Canada and the US are ranked second and third, with western Europe still well represented in the top 20.
 
The clearly overwhelming view that the regulatory environment in Singapore is a major driver of business demonstrates that strong regulation can be compatible with increased business dealings as long as the regulatory regime is clear, transparent and predictable.
 

5. Truly a Metropolitan City

 
SINGAPORE moved up 3 ranks in the past year to 8th place in the Schroders Global Cities Index in 2021, overtaking Hong Kong to emerge as the top city in Asia. The index looks to identify and rank the best global cities using 4 metrics; economic, environmental, innovation and transport. It identifies those cities with a combination of economic dynamism, world-class universities, forward-thinking environmental policies and excellent transport infrastructure. Singapore did well across all aspects even though it does not dominate in any particular category.
 
Singapore is a sunny, tropical island in South-east Asia, off the southern tip of the Malay Peninsula. The city-state is 710 square kilometres and inhabited by approximately five million people from four major communities; Chinese (majority), Malay, Indian and Eurasian. Since its independence in 9 August 1965, the country has adopted a parliamentary democracy system.
 
Singapore is a thriving metropolis offering a world-class infrastructure, a fully integrated island-wide transport network, dynamic business environment, vibrant living spaces and a rich culture largely influenced by the four major communities in Singapore with each offering different perspective of life in Singapore in terms of culture, religion, food, language and history.
 
One of the reasons that Singapore proves to be such an attraction as a home is the ease of living, particularly in terms of residence, transportation and governance system. Over the years, Singapore has made significant strides in many areas and has attracted an encouraging number of international accolades which recognise the city as vibrant and world-class. Whether it's the arts and cultural exchanges, the creation of cutting-edge innovation to enrich the lives of the communities at home or abroad, or the coming together of world-class minds to spark new business opportunities locally and internationally, Singapore is simply, the place where worlds meet.
 
Based on our strategic view and assessment, Singapore will remain one of the world's most attractive cities for businesses and investors in the post-pandemic world and this will continue to underpin housing demand over the medium to long term.

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