As the Chinese real estate market faces a downturn, some overseas markets are "benefiting" as a result.
Beyond the European, American, and Australian markets that have traditionally been favored by Chinese investors, Singapore—which is geographically close to China and presents almost no barriers in terms of language and culture—is becoming a new target for Chinese investors purchasing property.
Not long ago, a "tour group" consisting mainly of people from Wenzhou visited Singapore and quickly purchased over a dozen local properties within a few days. However, the representative of the Singaporean agency that hosted the group declined to disclose the total value of these properties.
The downturn in the Chinese real estate market has provided an opportunity for Chinese buyers to invest in Singaporean property. Based on past experience, times of instability in China and surrounding markets are precisely when opportunities arise in the Singaporean market.
According to the latest research report from Cushman & Wakefield Singapore, in the second quarter of this year, Chinese buyers accounted for 17% of foreign property purchases in Singapore, slightly lower than the 18% share held by Indonesian buyers. The agency believes that, based on current trends, Chinese buyers will soon surpass Indonesian buyers to become the second-largest group of buyers in Singapore's private residential market.
According to Cushman & Wakefield data, the proportion of property purchases by Chinese buyers in Singapore has risen rapidly from 7% in 2006 to 17% in the first half of this year. Malaysians have consistently been the foreign buyers with the highest proportion of property purchases in Singapore, accounting for 22%.
New Targets for Chinese Buyers
In Singapore, the latest case of a Chinese buyer that is still being talked about by locals involves a mysterious Chinese businessman who purchased a villa in the tourist destination of Sentosa for a total price of 36 million SGD (equivalent to 184.8 million RMB, calculated at an exchange rate of 1 SGD to 5 RMB), paying the full amount in one lump sum.
Sentosa is an area where Chinese buyers are relatively concentrated. Another project launched late last year, The Lakeshore, also saw more than half of its buyers being Chinese nationals. In March of this year, four members of a family surnamed Liu from Liaoning each purchased a villa in the project, with total prices ranging between 15.6 million and 26 million SGD.
Chinese buyers purchasing property in Singapore are mainly concentrated in the coastal area of Sentosa, the commercial hub of Orchard Road, and the Bukit Timah area, where prestigious local schools are located. The vast majority of Chinese buyers are purely investing, and a significant portion are Chinese individuals who have only recently obtained foreign passports.
Due to the concentrated influx of Chinese buyers, the secondary market in the Orchard Road area has seen transaction prices reach 5,000 SGD per square foot (equivalent to 25,000 RMB/square meter), a price that has set a new record for the highest unit price in the Singaporean real estate market.
In 2007, Singapore's housing prices reached a peak, with an average transaction price of 3,000 SGD per square foot. Due to the global financial crisis, prices fell back to over 2,000 SGD per square foot. Since the end of last year, prices have begun to gradually recover. "However, current Singaporean housing prices are still at a low level compared to 2007."
In fact, promoting their real estate projects in China is being included in the marketing plans of many Singaporean developers. A representative from a local Singaporean developer stated that they have planned to take one of their residential projects in Singapore to China for promotion, with the initial cities identified as Shanghai, Hangzhou, and Wenzhou. If the results are significant, the company will successively promote its other residential projects in Singapore to China.
Chinese Developers Advance into Singapore
It is not just individual investors who have developed a strong interest in Singapore; "forward-looking" Chinese companies have already begun acquiring land in Singapore to develop residential projects.
MCC Land, a subsidiary of the state-owned enterprise Metallurgical Corporation of China (601618.SH), has successfully bid for two residential development plots in Singapore in the first half of this year, with land costs totaling 259.5 million SGD. Earlier this year, Qingdao Construction from China also won a plot in Singapore at a high price, with a land cost of 113.74 million SGD and a floor price of approximately 607 SGD per square foot, far exceeding analysts' predictions.
On the company website of MCC [3.99 -0.50%], it was noted that company president Shen Heting visited Singapore early this year. After conducting research on the local real estate market and specific projects, he gave clear instructions: to leverage the current favorable situation and actively develop the real estate market in Singapore and surrounding countries.
In fact, while the shadows of the global financial crisis have not yet fully dissipated, Singapore's economy has been the first to recover to double-digit growth.
In mid-July, data released by Singapore's Ministry of Trade and Industry showed that Singapore's GDP grew by 26% quarter-on-quarter and 19.3% year-on-year in the second quarter of 2010, both higher than previous expectations. The year-on-year GDP growth for the first quarter was also as high as 16.9%. Consequently, the Singaporean government raised its 2010 GDP growth forecast from the 7%–9% range in May to 13%–15%. The economic growth data has given investors confidence.
As Singapore's population has experienced negative growth for several years, the Singaporean government has formulated a new plan to attract foreign investment immigration, with the ultimate goal of reaching a population of over 6 million. Under this plan, Singapore's population has already increased from the previous 3 million-plus to the current 4 million-plus, with room for a further increase of over 2 million in the future.
The entry of a new population means an increase in demand for residential housing in Singapore, and this policy will have a long-term impact on Singapore's private residential market. It is estimated that Singapore's private residential prices will rise by 12%–15% this year.
However, industry insiders in Singapore remind that it is indeed not difficult for Chinese people to buy property in Singapore; as long as the visa is legal, no green card is required, and no agency fees need to be paid. However, maintaining a house in Singapore requires paying an annual property tax of 1%–2% of the property's value. If used for rental, an additional 5%–10% of the rent must be paid as a management fee. Furthermore, labor costs in Singapore are high, and home maintenance and cleaning are also significant expenses.
