Singapore's housing prices rising again, outlook promising
May 15, 2018
The private residential property index rose by 5.41% during the year to Q1 2018, its second consecutive quarter of y-o-y price increases and the biggest growth in more than six years, according to the Urban Redevelopment Authority (URA). When adjusted for inflation, house prices actually increased 5.2% during this period.
During the latest quarter (i.e. q-o-q in Q1 2018), residential prices rose by 3.89% (3.79%% inflation-adjusted) - the steepest q-o-q rise since Q2 2010.
Some major developments that saw significant quarterly price growth in Q1 2018 (according to Jones Lang LaSalle national director Ong Teck Hui):
- In the Gramercy Park in Grange Road, CCR, prices rose by 9.1% q-o-q in Q1 2018
- In Martin Modern, off River Valley Road, CCR, prices climbed 14.5% q-o-q
- In the Reflections at Keppel Bay, CCR, prices rose by 5.7% q-o-q
- In The Interlace, located in CCR, prices were up 11.8% q-o-q
- In the Grandeur Park Residences in Bedok, OCR, prices increased 7.8% q-o-q
- In the Symphony Suites, in Yishun, OCR, prices rose by 3.9% q
All regions also saw rising house prices:
- In Core Central Region (CCR), prices of non-landed private residential properties rose by 6.6% (6.3% inflation-adjusted) y-o-y to Q1 2018, according to URA.
- In the Rest of Central Region (RCR), property prices were up by 2.8% (2.6% inflation-adjusted) over the same period.
- In Outside Central Region (OCR), property prices rose by 6.9% (6.7% inflation-adjusted) during the year to Q1 2018.
Demand remains strong. In 2017, total home sales, which include new sales, sub-sales and resales, surged 52.7% y-o-y to 25,010 units, the biggest increase since 2009, according to URA. Then in Q1 2018, total transactions rose again by 2.4% y-o-y, to 5,328 units.
Singapore's housing market is expected to improve further in the coming months, as many investors are being lured back into the market, according to some local property experts.
- "Supported by better-than expected economic growth, the outlook for the Singapore private residential market in 2018 is promising," said Savills. "Prices have started to recover from a slump which has lasted since late 2013 and will continue their upward trend in 2018, driven by bullish prices paid by developers for both private residential sites and GLS sites."
- "Singapore's prime residential market has appeared to be more attractive relative to other global cities. It is still in the early stages of recovery while Hong Kong, Sydney, Melbourne and Tokyo are nearer the top end of their market cycles or peaking, while the prime London market is in decline," said Jones Lang LaSalle national director Ong Teck Hui. "That could divert more investor demand to Singapore, thereby supporting further prices increases," said JLL's Q1 2018 report.
- Singapore's home prices will increase by around 4% to 8% this year, without any external shocks, according to Edmund Tie & Company.
Singapore's economy grew by 3.6% in 2017, faster than the 2.4% growth in 2016, according to the Ministry of Trade and Industry. Recently, the central bank raised its economic growth forecast for 2018 to 3.2%, from 3% last December.
Since July 19, 2005, under the Residential Property Act, foreigners can now buy apartments in buildings of less than six stories without prior government approval. However, foreigners still cannot purchase vacant land and landed properties without permission from the Singapore Land Authority. Non-residential property is not subject to these ownership restrictions.
Aside from these restrictions, foreigners can buy condominiums freely. There are few foreign exchange restrictions, and non-residents can now borrow up to 80% of the property cost locally, in Singapore Dollars.
You wouldn't own a Singapore condominium for rental yields!
Singapore is a safe haven, it is a liquid market, everyone in Asia knows and trusts its institutions. Low interest rates have played their part in pushing property prices up, despite the efforts of the ever-vigilant Monetary Authority of Singapore and the government. Property in Singapore commands a premium, and conversely returns to owners who rent out their properties are low.
Nobody can say that condos in Singapore are cheap, at around US$13,500 per square metre (sq. m.). That’s because there’s a ‘global city’ premium. Gross rental yields in Singapore remain poor, at around 2.5%. Yields are a little higher on smaller apartments than large ones, as is typical in most property markets. But those yields alone would not be a reason for owning property here.
Prices have been falling gently over the past 2 years, especially in the core and central region.
Round trip transaction costs are very low in Singapore. See our Property transaction costs analysis for Singapore and Property transaction costs in Japan, compared to the rest of Asia.
Rental income tax in Singapore is high
Rental Income: Net rental income earned by nonresidents is taxed at 22%. Property tax, insurance, maintenance and repairs are all deductible from gross rental income.
Property Tax: Property tax is levied at a flat rate of 10% for rental properties. Foreigners pay a 10% surcharge.
Capital Gains: There is no capital gains tax.
Inheritance: There is no estate duty as of 15 February 2008.
Residents: Residents are taxed on their income at progressive rates, ranging from 2% to 22%.
Roundtrip buying costs in Singapore can reach 34.45%
The total roundtrip costs are about 13.45% to 34.45%. The buyer pays stamp duty at around 1% to 3%. The buyer may pay additional stamp duty of 5% to 15. Because Singapore uses a common database of all property listings, there is no sense in hiring more than one agent. To register the property, there are four procedures, typically done in six days.
Singapore favours landlords
With the passage of the Control of Rent (Abolition) Act in 2001, the law in Singapore became clearly pro-landlord.
Rents: The parties can freely determine the rent and the rate of rent increase. Tenants usually pay a security deposit of one month’s rent for every year of lease.
Dispute Resolution: Most landlord and tenant disputes are resolved through mediation or Alternative Dispute Resolution, usually through groups such as the Consumer Association of Singapore (CASE) and Singapore Mediation Center (SMC).
Robust economic growth, falling unemploymentSingapore’s economy grew by 3.6% in 2017, faster than the 2.4% growth in 2016 and 2.2% growth in 2015, according to the Ministry of Trade and Industry. The upward momentum continued this year, with a 4.3% expansion in Q1 2018, on the back of strong manufacturing sector, according to the Ministry of Trade and Industry (MTI).
During Q1 2018:
- The manufacturing sector was the key growth driver, registering a growth of 10.1% y-o-y, up from the 4.8% expansion in the previous quarter.
- Services, which make up about two-thirds of the economy, expanded by 3.8% y-o-y, slightly up from the previous quarter’s 3.5% growth.
- Construction contracted by 4.4% y-o-y, an improvement from annual declines of 5% in Q4 2017, 9.3% in Q3, 12.2% in Q2 and 6.9% in Q1.
Recently, the central bank raised its economic growth forecast for 2018 to 3.2%, from 3% last December.
In the first quarter of 2018, the seasonally adjusted overall unemployment rate was 2%, down from 2.1% in the previous quarter and 2.2% a year earlier, according to the Ministry of Manpower (MOM). Unemployment among Singaporeans was unchanged at 3% in Q1 2018 from the previous quarter while it fell from 3% in Q4 2017 to 2.8% in Q1 2018 among Singapore residents. Retrenchments fell to 2,100 - the lowest level in nearly seven years.
Inflation stood at 0.2% in March 2018, from 0.5% in February and 0% in January, according to the Department of Statistics Singapore. Inflation was 0.6% in 2017, -0.5% in both 2015 and 2016, 1% in 2014, 2.4% in 2013, 4.6% in 2012, and 5.2% in 2011. It is estimated that inflation will accelerate to 1.2% in 2018, according to the IMF.
In April 2018, the country’s central bank, the Monetary Authority of Singapore, tightened its monetary policy for the first time in six years, amidst strong economic growth. This policy stance is consistent with a modest and gradual appreciation path of the Singapore dollar nominal effective exchange rate (S$NEER) policy band that will ensure medium-term price stability, said the central bank.
The average exchange rate in March 2018 was USD1 = SGD1.315, a slight appreciation from USD1 = SGD1.405 in the previous year.
“Since October 2017, the S$NEER has appreciated in the upper half of the policy band, apart from a brief period of decline in early 2018. This development reflected, in part, broad-based US dollar weakness and depreciation in a number of regional currencies against the S$,” said the MAS in its April 2018 statement.