Why Investing in Singapore for the next 3-5 years is still a good bet.
Opinion by Colin Tan ColinTan Training and Consultancy (Updated 5 April 2010) Introduction There have been a lot of people coming out to speak about the Singapore property market, from analyst to coffee shop talk, many with differing opinions. However, the common take is that the market has reached its saturation point. In this article, I hope to bring some light into the Singapore property market and as far as I can see, I do feel that the property market will continue to rise for a good 3 to 5 years at least (especially in high end market) In 2005, I said that the prices of landed properties in Sentosa would eventually become more expensive than Good Class Bungalows (GCB); many people industry thought that Ive lost it. Today, considering the sizes as well as the 99year tenure of these Sentosa landed homes, they are truly more expensive than GCB.
in these areas. If they start to feel that Singapore is like a second home, they will come. Lets examine the factors that will transform the city of Singapore. Transforming factors Below are some of the changes that have taken place over the last few years which shows the governments relentless effort to turn Singapore into a very attractive and fun to be in city like that of the many major cities in an attempt to stop the brain drain and to attract foreigners that can contribute to the development of Singapore. As I expand on some of the points below, you will start to see a little bit of London, New York, Hong Kong, Sydney, etc. Transforming the city to a vibrant and lively place to work, live and play. 1) Allowing commercial properties to be redeveloped into residential properties to encourage more people to live and play in the city and hence bringing life to the city. This is still in the transition stage as many of the developments are not completed yet. At the moment the government has temporarily stopped allowing commercial properties to be redeveloped into residential properties in an attempt to counter the shortage of commercial properties due to the current economic climate. When more residential properties are completed and occupied, our city will be a very beautiful and lively place similar to Hong Kong, New York etc. 2) More Lifestyle Homes Meant for The Super Rich With the release of land in Sentosa to cater to homes meant for the Super Rich and allowing foreigners to buy these properties and at the same time giving the buyers Permanent Residence status, the sign is non clearer that we are going all out to attract not only the super rich from the west, but also the new super rich from China, India and all of Asia. 3) Theatres and the Development of the Esplanade Theatre (a little bit of London, Broadway, etc) a-la the Sydney Opera House and encouraging more performing artistes and talents to Singapore and also relaxing the immigration policies to encourage these group of people to come. It is no secret that the theatres are very important way of life to the Global Citizens. 4) 24-hr licensing for watering holes to promote Singapore as a fun place. Weve also seen more international names like Caf Del Mar, MOS, etc coming to our shores. Zouk Out has been recognized internally for some time now while we also have WOMAD. What makes it so important for the government to have to spend precious time to deliberate on whether to allow for pubs and discos to be opened for 24hrs?
transport infrastructure will provide seamless connectivity for companies and professionals to grow and exchange business ideas. It will be place with a loop of attractions and round-the-clock energy that continues during and outside office hours. http://www.marina-bay.sg/explore.htm 7) Singapore Flyer (a little bit of London) The Singapore Flyer will transform the visual landscape of the surrounding Marina Bay area. In addition to the Singapore Flyer, construction on Asia's largest business and financial centre has commenced and a world-class Integrated Resort (casino) is due to start operations in 2009. The Marina Barrage (a dam built across Singapore's Marina channel) is also due for completion. http://www.singaporeflyer.com.sg 8) Casinos Singaporeans have been doing fine without a casino on our shores for over 40 years. So you think that our government spent so much time debating about the casinos for the entertainment of Singaporeans? No! To tell the Global Citizens that Singapore is a place like home for them. A playground for the Rich and Famous!
On the 21 Nov 2006, Our Government announced the plan to incentivised developers who incorporates external lightings to enhance the nightscape of the Singapore skyline to transform Singapore into a vibrant and stunning city like that of Hong Kong, Tokyo, etc. 12) M.I.C.E. (Meeting, Incentive, Convention and Exhibition) Singapore has in recent years become a major player in the world for holding major world events, conventions and exhibitions. In 2005, we had the 117th International Olympic Council Session where London won the rights to host the 2012 Olympic Games.
In 2006, Singapore hosted the IMF and World Bank meeting of the Board of Governors.
The University of Chicago, whose Asia campus sits in a restored 121-year-old traditional Chinese estate, is just one of a growing field of offshore institutions in Singapore.
15) Singapore as Medical Tourism Hub Singapore plans to become a leading Medical Tourism Hub lead by Singapore Medicine, a multi-agency government initiative. Besides direct economic benefits, spill over should be experienced in the property sector as well as many other sectors. To reach a level where Singapore can accommodate the needs of 1 million medical tourists, more facilities would be needed. Singapore would also see an increase in expatriate doctors, nurses, support and administrative staff. That would mean an increase in demand for properties for purchase or rent.
16) Population Increase to 6.5 Million With the governments attempt to increase the population to 6.5 million people, well invariably see an increase in demand for property in the mass market as well as the central districts mentioned. Singapore will benefit from this critical mass increase with the increase in the consumer market. From many of the initiatives above, were already seeing an influx of many highly qualified people coming to ply their trade in Singapore; with the increase in the consumer market, more business setups would be seen in the next few years to take advantage of this accelerated population growth. Even though youd expect most of the demand from these new Singapore citizens, permanent residents and expatriates to be for properties in the mass market, many of the businessmen, CEOs and the rich who start or relocate their business to Singapore would be more interested in the properties located in the financial, shopping and lifestyle districts thus driving the prices up further.
Source: KPMG Competitive Alternatives Study, 2006 According to a study by accountancy firm KPMG, Singapore is the most cost-competitive business location among nine industrialised countries. The bi-annual study - which covers 128 cities in nine countries - indicated that Singapore was 22 per cent cheaper than the benchmark United States. KPMG's 2006 Competitive Alternatives study analyses 27 cost components, including wages, freight, business taxes, rent and utilities.
Other Telltale Signs 18) Fund Managers and Investors Activities In recent times, weve seen more and more properties bought in volume. Many of these buyers are fund managers and large investors. On top of that, weve seen more buyers of diverse nationalities flocking to Singapore; people from the US, the Europeans, etc. In the past we dont see as many of these people. In the past, most of the people who bought properties in Singapore tended to come mostly from Indonesia and Malaysia whilst the Americans and Europeans would probably bought properties here more for their own use and not so much like now where they are buying to invest. 19) Lack of Disparity in price between the prices of properties in the mass market compared with the high-end market Another sign that I feel is a good indication that the prices of properties in our financial, shopping and lifestyle district can go up much more is the lack of sufficient disparity between the prices in the mentioned regions versus the mass market property prices. In many developed economies, youd find property prices in the highmarket to be ten times or more that of the mass market. I.e. today, you would need to pay as much as 6000($18,000) per square feet for a property around Knightsbridge in London and for a small cottage in a suburb half hour away, you probably only pay the price of an HDB flat. In KL, a similar condominium costing RM$2,000,000 would probably go for RM$200,000 around the Ampang area. The difference is 10:1. Therefore based on the examples above, it would not be surprising to find that the prices for properties in the suburb to remain around $1,000 per square foot and below while the prices for properties in the 3 major areas to go up to $10,000 per square foot.
between around 2 odd percent. My gut feel is that theres still more room for growth; including the price of properties in the three main regions. Conclusion Many people looking at the current readjustment as an indication that the price of property has reached saturation point. I feel that nothing is further from the truth Many of the government initiatives, redevelopment of certain areas, vibrancy to the city, Singapore as a fun place to live, IRs, population increase etc are all still under construction and we cannot feel the real impact until everything thing is in place. But do you want to wait before that happens? Analyse the above 20 points Ive given and you can decide for yourself. You may already notice that Ive been talking about the three main regions. Thats why you always hear people say that when buying a property, must consider 3 things; location, location and location. However, its not all doom and gloom for the mass market. One major factor that would contribute a little (you notice I said a little) to the increase in the prices for the mass market properties would be the increase in our population. As for the three regions, I wont be surprised to see the prices soar between $7,000 to $10,000 per square foot and even more.