Analysis | The Beverly Hills of Singapore Shows Signs of Froth

In May, a 6,092 square-foot apartment in Maisons Nassim was sold by its Hong Kong-based developer Shun Tak Holdings, which is run by the late Macau gambling tycoon Stanley Ho’s daughters Pansy, Daisy and Maisy. It went for S$37 million ($27 million), the fourth-highest per square foot price on record for a new Singapore condo, according to OrangeTee & Tie, a property brokerage.

The buyer’s identity isn’t known. It could be a Singaporean tycoon who wrote the check, but the Les Maisons unit might well have been one of the 84 snapped up in May by foreigners, marking a big-bang return of global interest in Singapore property after the first quarter’s lull. Nor would it be a surprise if the money came from an expatriate banker: Permanent residents bought 142 units in May, compared with 79 the previous month.

Mind you, such things weren’t supposed to happen this year. For both foreigners and PRs, already-steep additional stamp duties were further raised in December. Foreigners have to shell out a 30% levy, while PRs now pay 25% on their second homes and an unchanged 5% on first purchases. Only Singapore citizens buying their first homes are exempt from additional duties, which sit on top of the standard graded rate that rises to a maximum of 4% above S$1 million of market value. Despite such high taxation, there’s suddenly no dearth of homebuyers in Singapore, either local or foreign. The inescapable conclusion is this: The city-state’s latest property curbs have already lost their sting.  

Will the Singapore authorities need to introduce more draconian restrictions? Maybe not this year, provided the U.S. Federal Reserve remains hawkish enough to deliver a second 75-basis-point increase in interest rates in July.

Since the 2009 start of the global cheap-money era, Singapore has made 11 attempts to rein in speculation in its residential property market. The goal has been to prevent prices from rising too fast too soon; the tools have ranged from higher stamp duties to lower mortgage loan-to-value limits and stricter debt servicing ratios for homebuyers. But the effect of these so-called cooling measures doesn’t last. “Sentiment typically recovers around two to six months after each round,” says Christine Sun, senior vice president of research and analytics at OrangeTee & Tie.

This time, it’s back to business-as-usual in five months. After surging 10.6% in 2021, Singapore home prices inched up by just 0.7% in the first quarter. However, developer sales for May seem to suggest strong pent-up demand. What’s more, activity appears to be heating up when money is no longer cheap. DBS Group Holdings Ltd., the island’s largest bank, recently raised the rate on its two-year fixed rate package by 0.3 percentage points to 2.75% per annum, according to The Straits Times. Other banks have already made their mortgage plans more expensive. 

One reason why potential condo buyers are still keen is skyrocketing rents. According to a Bloomberg News survey of real-estate agents, rental prices are rising 20% to 40% on average for private homes leased by expatriates. Tenants are coming back. “Foreigners have begun to, slowly but surely, return to the city as the country further relaxes safety management measures and opens its borders,” says PropertyGuru Pte., which runs a popular online property portal. That changes the buy-or-rent equation for self-occupiers even at higher mortgage interest rates; it could also bring in yield-seeking investment, or at least offset the impact of higher annual property taxes for non-owner-occupiers from 2023. (Unlike the stamp duties, the property taxes aren’t a cooling measure; their main goal is to keep a lid on wealth inequality in the financial center.)

Limited supply of new homes is also attracting buyers to new projects that are getting launched. Billionaire Kwek Leng Beng’s City Developments Ltd. and its partner MCL Land Holdings sold 77% of their jointly developed 407-unit Piccadilly Grand over one weekend in early May at an average price of S$2,150 per square foot.  

A rare Nassim Road property can afford to be pricey; Piccadilly Grand, too, sits on a location central enough to command a premium. But if like last year, the froth starts to spill over into middle-class, suburban homes, authorities will have to come in and break up the party. For now, though, they just might wait for the Fed to do the job.

But will it? Singapore’s rapid post-pandemic re-opening offers a stark contrast with arch-rival Hong Kong. Bloomberg Intelligence estimates that new-home sales in the Chinese special administrative region could fall 20% this year. It’s in Hong Kong — and not Singapore — where the rising cost of capital may really come to bite. That’s because weak economic activity means lackluster rental demand. A landlord who’ll earn a rental yield of 2.2% on an investment property, and pay a floating mortgage interest rate of 2.2% — subject to a sharp increase — may as well head over to Singapore. Looks like they already are. 

More From This Writer and Others at Bloomberg Opinion:

• Singapore Landlords Don’t Fear a Global Economy: Andy Mukherjee

• Singapore Property Is Hot Even Without Expats: Andy Mukherjee

• Disquiet Over the Housing Market Is Only Growing: John Authers

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. Previously, he worked for Reuters, the Straits Times and Bloomberg News.

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