ABSD may deter some foreign players

Business Times: Thu, Feb 09

(SINGAPORE) Buying behaviour among foreigners may change in the coming months as the real impact of the additional buyer's stamp duty (ABSD) kicks in, say consultants. For one, despite their deep pockets, Indonesians may back away from investing in Singapore residential property as the ABSD coupled with existing seller's stamp duty might prove too lethal from an investment perspective. In addition, the once-popular smaller format homes could also face slower take-up going forward as their buyer base - typically made up of short-term investors - gets eroded, said Alan Cheong, head of research at Savills Singapore. In particular, Mr Cheong pointed out, mainland Chinese, who form the bulk of foreign buyers in the smaller home category, may turn to alternative investments such as strata-titled offices, retail or industrial assets for a bigger bang for their buck. However, Lee Sze Teck, senior manager at DWG research and consultancy, does not expect a significant switch of foreigners' funds from residential properties into industrial or commercial options. 'When the market eases, generally residential comes down first, followed by commercial, industrial and retail. Therefore, it is unlikely any sector would be spared a downturn. It is only the magnitude,' said Mr Lee. Likewise, Nicholas Mak, executive director of SLP International's research and consultancy arm, said that foreigners are unlikely to make a major switch into retail, industrial and commercial assets due to their lack of familiarity with the product. For foreigners who currently own residential properties in Singapore, director of R'ST Research Ong Kah Seng noted, they would make only new purchases that possess 'unparalleled property fundamentals' and can offer attractive long-term upside, or very 'competitively priced' properties which can offset the impact of the ABSD. 'Ordinary properties with few attractive pricing elements like discounts and special packages may see lacklustre foreign interest, unless the locality has a special place to anchor the hearts of the foreigner,' he said. For the rest, many have turned to renting as opposed to buying, as they await further clarity on where the market is headed. In fact, based on data from the Singapore Real Estate Exchange (SRX), both rental rates (per square foot) and rental yields have gone up in the Core Central and Rest of Central regions since the implementation of ABSD. Having said that, the super-rich foreigners who continue to view Singapore as a top long-term investment destination are likely to remain relatively undeterred by the cooling measures, and will continue to buy properties when an attractive opportunity arises. Specifically, mainland Chinese and Indonesian buyers in the 'over $5 million purchase' category are likely to remain strong players in the super-luxury segment, said Savills' Mr Cheong.   Source: Business Times