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Return of China property buyers in bigger numbers unlikely to impact prices in Singapore: Analysts
SINGAPORE: The easing of COVID-19 measures in China is likely to see a renewed interest from its nationals in buying property in Singapore, but not in such numbers that prices here will be affected much, property analysts said.
With China abandoning its COVID-zero stance and the easing of all pandemic restrictions in Singapore, buyers are expected to return to the local property market.
“We expect more foreign buyers and permanent residents to return to Singapore’s property market, especially with the reopening of China’s international borders,” said Ms Christine Sun, senior vice president of research & analytics at OrangeTee & Tie.
“Many mainland Chinese buyers may start travelling here after the Chinese New Year holidays. Some may come to work, study or conduct business. Some may rent while they take time to settle down in Singapore.”
Mr Lee Sze Teck, senior director of research at Huttons also said that foreign buyers are “back in force in January”, picking up 57 units in January, 58.3 per cent higher than the month before.
In the past decade, mainland Chinese buyers have made up the biggest group of foreign buyers of property here.
In a written parliamentary reply in January, Minister for National Development Desmond Lee shared a table of the percentage of private residential property transactions by Singapore citizens, foreigners, permanent residents and companies for the last 10 years.
The share of units purchased by Singaporeans went up from 73.7 per cent in 2013 to 82.6 per cent in 2021. It then decreased slightly to 79.9 per cent in 2022 which is similar to pre-COVID-19 levels in 2019.
The proportion of private homes bought by permanent residents has hovered around around 13 to 16 per cent in the last 10 years, while the proportion of foreigners buying homes has fallen, from 7 to 8 per cent 10 years ago to 3.5 per cent in 2022.
But even with an expected resurgence of interest, it is unlikely that this would have much of an impact on the local property market as purchases by foreigners form a tiny minority of overall deals, said PropNex CEO Ismail Gafoor.
He pointed out that last year, 78 per cent of the non-landed private residential transactions were by Singaporean buyers with foreigners only accounting for 4.8 per cent. Singapore permanent residents accounted for about 17.6 per cent of sales.
“Chinese buyers tend to make up a sizable proportion of sales to foreigners, but they still only account for a fraction of total transactions,” he said. “Singaporean buyers continue to dominate home sales.”
In 2022, foreign Chinese buyers bought 241 non-landed private homes in Singapore, which is 26.5 per cent of transactions by foreign buyers – but it contributed only about 1.3 per cent of total transactions for condo sales, he said.
Last year’s sales to foreign Chinese buyers were the lowest since 2010, according to data compiled by PropNex. But figures from the last decade show that the number of transactions has not gone above 700 units, or more than 3.6 per cent of total sales.
It has also come down in the last four years to fewer than 500 units a year.
If PRs are included, the number of condominiums purchased by mainland Chinese buyers in 2022 was 1,351, fewer than the 1,738 units bought in 2021, said Ms Sun.
In terms of proportion, the number of condos bought by mainland Chinese buyers, both permanent residents and non-PRs, rose from 5.9 per cent in 2021 to 6.9 per cent in 2022, she said.
“Although mainland Chinese buyers are the top foreign buyers, they still constitute a small proportion of buyers in the market. Therefore, they may not cause overall prices to surge too much,” said Ms Sun.
“GUARDRAILS” FOR PROPERTY MARKET
And while there are likely to be more foreigners entering the market, property analyst Nicholas Mak, head of research and consultancy at ERA Realty Network, noted that the uncertain economic environment may limit demand.
Singapore’s official growth forecast for 2023 is pegged at 0.5 per cent to 2.5 per cent, lower than 2022’s 3.6 per cent.
Demand for property tends to increase in tandem when the economic outlook is buoyant, Mr Mak said, likening it to a tide that brings in more buyers.
“This time round, the tide is not coming in at full speed … so could that also bring more caution among these foreign buyers?” he said.
Mr Mak said that foreign buyers also are put off by the high Additional Buyer’s Stamp Duty (ABSD), which is 30 per cent. For PRs buying their first property, the ABSD is 5 per cent, going up to 25 per cent for the second property and 30 per cent for subsequent ones.
“They would rather rent first … then when they get their PR, then they buy private property,” he said.
He added that Singaporeans need not worry about foreigners pushing up property prices.
“I think for majority of Singaporeans, eight out of 10 buy HDB flats. The Government has put in enough guardrails to ensure that foreigners don’t come in to speculate,” he said.
Mr Lam Chern Woon, head of research and consulting at Edmund Tie noted that the proportion of foreign purchases in private homes climbed to 9.2 per cent in January, up from 8.3 per cent in December, as China’s border reopens.
“Moving forward, we expect (the) share of foreign purchases to inch up in 2023, on the back of China’s reopening, with demand from mainland Chinese for private homes in Singapore expected to gradually recover in 2023.”
But he projects prices to grow at just 1 to 3 per cent for 2023, down from 2022’s 8.6 per cent, amid projected slower economic growth and ongoing macroeconomic headwinds.
MORE INTEREST FROM CHINESE TO MOVE TO SINGAPORE
The potential interest in the local property market identified by analysts comes as companies that help foreigners relocate told CNA that they have seen a spike in enquiries from China nationals who are keen to move to Singapore.
Reuters reported last month that Singapore has seen a “fresh influx of wealth since 2021” after many Chinese became disillusioned with China’s draconian COVID policies, citing skyrocketing golf memberships and lawyers who set up family offices.
Singapore’s number of family offices – which handle investments and financial matters for the ultra-rich – grew to about 700 family offices, up from 400 in end-2020 and up sevenfold from 2017, according to government estimates.
The Monetary Authority of Singapore reported in October that Singapore’s asset management industry grew 16 per cent in 2021 to reach S$5.4 trillion, with 78 per cent of funds sourced from outside Singapore.
This comes also as Singapore’s population of PRs and foreigners rebounded to nearly pre-COVID levels. After two years of decline, the non-resident population grew by 6.6 per cent to 1.56 million from 2021, but was still lower than the pre-COVID level of 1.68 million in 2019.
AnjiaSG, which helps Chinese clients with relocating to Singapore and buying property here, said it is getting five to six times more people asking them about their services, compared with about 100 enquiries it received each month during the COVID-19 pandemic.
Mr Leo Kwek, an international real estate investment consultant at AnjiaSG, said the increase started in April last year, before China announced its reopening and around the time that Shanghai went into lockdown again for COVID-19.
Another immigration and relocation firm, AIMS, saw queries jump from “about 10 a week to 10 a day”, going up about five to six times in total, from the second quarter of 2022.
CEO Pearce Cheng said: “The spike (in interest) was very obvious … but they were having problems renewing their passports.”
Even so, his firm helped 10 to 12 Chinese clients a month move to Singapore last year, which is about double the number of clients they saw before the pandemic.
LIFT FOR LUXURY MARKET?
One segment of the property market that may gain in 2023 after the lifting of border measures by China is the luxury market, some analysts said.
Mr Lee said that super-wealthy Chinese were said to be behind some of the purchases in Klimt Cairnhill in January, pushing the project to become the number three bestselling project that month. Fourteen out of 17 units at Klimt Cairnhill were sold to foreigners.
“This could be the year where the luxury market sees more high-profile deals with the return of super-wealthy Chinese,” he said.
Mr Gafoor said that based on non-landed new home sales transactions, Chinese buyers typically prefer residential properties in the Core Central Region, particularly in Districts 9 and 10, which is the Orchard area.
But the increase in foreign buying interest is not expected to significantly impact this part of property market, as Singaporean buyers accounted for the bulk of home sales for higher-end properties as well, he added.
One reason why people think there are more Chinese buyers than there are in reality is the attention-grabbing anecdotes and news stories about high-value deals, said Professor Qian Wenlan, director of the National University of Singapore’s Institute of Real Estate and Urban Studies.
But the data does not show any “significant upward trend” of foreign Chinese buyers acquiring homes in Singapore, she said.
“By and large, headlining transactions covered in the media or frequently discussed, are outliers such as high-end or luxury condos which are not typical of the market,” she said.
“There could be an impression that Chinese buyers are entering the market, targeting certain upscale submarkets that get covered by news … but actually, in the data, we don’t see that in a typical transaction.”
Source: CNA/hm