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Foreigners snap up homes as rents start to bite

Business Times – 12 Mar 2008Their purchases could account for half of 2007 transactions on the secondary market

 (SINGAPORE) A record number of foreigners here have opted to purchase homes instead of renting them at ever-climbing rates.

According to an analysis of transactions of private residential properties by DTZ Debenham Tie Leung, foreigners bought 6,536 non-landed homes from the secondary market in 2007 – the largest number since 1995.

They could account for more than 50 per cent of the secondary market transactions last year. That is because while more than 20,000 non-landed homes were sold on the secondary market last year, this number includes the units from more than 100 collective sales. DTZ’s analysis does not include en bloc units – though earlier reports had put this figure at around 6,000 for the first half of 2007 alone.

Purchases by foreigners on the secondary market represent a 105 per cent increase in volume compared to 2006.

DTZ research senior director Chua Chor Hoon said that while some buyers were investors, there were also those who ‘are not on company budget and find it more worthwhile to buy rather than face escalating rentals, especially if they are going to be in Singapore for more than a couple of years’.

DTZ’s figures for 2007 reveal that rents of prime apartments and condominiums increased 45 per cent year-on-year in 2007 to average $4.80 per square foot (psf). This was attributed to the influx of expatriates and a tight supply of prime apartments, as numerous prime developments were demolished or slated for redevelopment after being collectively sold.

The percentage of foreigners buying non-landed property from the primary market (developer sales) was lower at 25.4 per cent, or 2,314 transactions out of a total of 9,089, reinforcing the assertion that foreigners are more inclined to buy a home for immediate occupation.

Indonesians and Malaysians remain the biggest foreign buyers here, accounting for 23 and 17 per cent of all foreigners in 2007 respectively, but Indians (12 per cent), Britishers (8 per cent), Chinese (7 per cent) and Koreans (7 per cent) are also well represented.

While foreigners bought non-landed homes in record numbers last year, boosting demand in the process, their absence in the landed homes sector (because of restrictions imposed by the government) did not stop a record number of landed homes being sold in the secondary market.

DTZ’s analysis reveals that of the total 5,211 landed homes sold in 2007, 4,823 were from the secondary market.

Apart from the bullish sentiment which ‘spilled over’ from the non-landed sector last year, the landed sector also saw demand rise as it was still considered comparatively good value.

DTZ’s figures show that average capital values for non-landed freehold homes in the prime districts increased by 55 per cent

year-on-year to $1,480 psf.

For freehold landed homes in the prime districts, average capital values of detached homes increased 31 per cent year- onyear, while average capital values of semi-detached and terrace homes rose 29 and 27 per cent respectively.

The situation was also exacerbated by the tight supply of new launches of landed homes in the year, estimated at around 650 units.

DTZ’s Ms Chua also believes that with speculation less rampant in the landed housing sector – ‘most buyers are owneroccupiers’ – prices are expected to be more stable and could even prove ‘more resilient’ if the downturn in the global economy is protracted.

However, DTZ expects future supply of landed homes to be relatively low at just 3,100 units over the next few years, so this could push up demand and prices for both primary and secondary market landed homes.

Speculation, defined by the number of subsales, was rampant among developer sales of non-landed homes last year, hitting an all-time high of 4,631 transactions – a 312 per cent year-on-year increase over 2006.

Interestingly, while subsale transaction volume in 2007 was just 27 per cent higher than during the previous peak of 1996, the value of subsales was almost twice as high, hitting $7.9 billion.

The fourth quarter, however, marked a shift in sentiment in the property market. Only 3,947 non-landed homes were transacted in the quarter, of which just 846 were sold by developers, reflecting a 64 per cent quarter-on-quarter drop. This was one of the worst performing quarters in the last three years.

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