Why the Real Estate Industry is an Evergreen Business

Amidst recession fear of high inflation and rising interest rate, many investors and Singaporeans are still actively looking out for real estate investments. This has led to the Singapore government taking cooling measures to ease the property market.

On 27th April, the new ABSD(Additional Buyer Stamp Duty) took into effect which is meant to slow the effect of foreign investment. The ABSD rate jumped by double from 30% to 60% for foreigners looking to buy a property in Singapore.

Essentially, this makes the potential earnings for future returns of private condominiums over 10 years to be slim to none as seen in the diagram below.

Average selling price psf for new condominiums. (Image: TODAY/Samuel Woo)

Although this might have worn off potential investors, there are still some investors out there who don’t mind paying for the extra tax calling these payments “necessary for their children”.

Foreign POV of Singapore

If you were to ask any foreigner living in Singapore, they typically have huge envy for Singaporeans having the opportunity to own a property here.

Apart from being safe haven asset, living in Singapore is considered by many other South East Asia countries to be the place with the best facilities. From the best education, medical treatment to one of the safest places to live in.

Why there is always a Demand

In a bull(up) or bear(down) market, people are always in need of a place to stay. We have actually seen that recently with the current downtrend of the economy.

Even though most parts of the world are suffering from a recession, the Singapore property market is still ever-growing which led to a need for government intervention to ease the property market.

So what makes Singapore property a highly valuable investment🔽

Limited land supply

Singapore is a small island city-state with a limited land area. As a result, there is a scarcity of available land for property development. The government carefully manages land use and imposes strict zoning regulations, which restrict the construction of new properties. This limited supply of land creates a constant demand for the existing properties.

Stable economy

Singapore has a strong and stable economy, which attracts both local and foreign investors. The city-state is known for its business-friendly environment, low corruption levels, and robust legal system. Many multinational companies choose to establish their regional headquarters or offices in Singapore, leading to a steady influx of expatriates and foreign professionals seeking accommodation.

High standard of living

Singapore consistently ranks highly in global indices for its quality of life. The city-state offers excellent infrastructure, healthcare, education, and security, making it an attractive place to live. This drives demand for residential properties from both locals and foreigners who aspire to enjoy the high standard of living that Singapore offers.

Strong property rights and regulations

Singapore has a well-established legal system that safeguards property rights and ensures a transparent property market. Buyers and investors have confidence in the system, knowing that their investments are protected. Additionally, the government regularly reviews and adjusts property regulations to maintain a stable market, which further enhances investor confidence.

Attractive investment opportunities

Singapore’s property market has historically shown appreciation in value over the long term. Real estate is seen as a relatively safe and lucrative investment option, with potential capital gains and rental income. Many investors, both local and foreign, view Singapore properties as a desirable asset class for wealth preservation and growth.

Vibrant cultural and lifestyle offerings

Singapore offers a diverse and vibrant cultural scene, with numerous entertainment, dining, and recreational options. The city-state is known for its cleanliness, safety, and well-planned urban environment. These factors contribute to its appeal as a desirable place to live, attracting individuals and families who value a well-rounded lifestyle.

It’s important to note that while there is generally high demand for properties in Singapore, market conditions can fluctuate based on various factors such as economic conditions, government policies, and global trends.

Will the Property Market Ease

While many are always using the “wait and see” approach to property investing

Government policies: The Singaporean government closely monitors the property market and implements measures to maintain stability and prevent overheating. They have the ability to introduce policies such as cooling measures, stricter loan requirements, or adjustments to property taxes, which can impact demand. If the government decides to implement measures to cool down the market, it could potentially ease demand.

Economic factors: Economic conditions play a significant role in the property market. If there is a slowdown in economic growth or a downturn in specific industries, it could impact demand for properties. Economic uncertainties or changes in employment conditions can influence individuals’ purchasing power and willingness to invest in real estate.

Interest rates: Changes in interest rates can affect the affordability of borrowing for property purchases. Higher interest rates could potentially discourage buyers and result in a decrease in demand. Conversely, lower interest rates might stimulate demand as borrowing becomes more affordable.

Market cycles: Like any market, the property market operates in cycles of expansion and contraction. Demand can vary depending on the stage of the cycle. While there may be periods of high demand, there can also be periods of relative moderation or adjustment. Factors such as supply and demand dynamics, investor sentiment, and overall market sentiment can influence these cycles.

It’s important to note that the Singapore property market has historically shown resilience and adaptability. The government has a strong track record of actively managing the market to ensure stability. While demand may ease in certain circumstances, the long-term prospects for the Singapore property market remain positive due to the country’s strong fundamentals, attractive investment climate, and ongoing urban development.

Leave a Comment