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Singapore property still a top draw for Asia's ultra-rich

02 Mar, 2017

Singapore’s property market remains high on the agenda of Asia's ultra-rich, notwithstanding the cooling measures still in place.

Its commercial properties are a top consideration for Asian ultra high net worth individuals (UHNWIs) keen on this asset class, moderately ahead of the UK and the US.

Singapore's residential market is the second most likely place for Asian UHNWIs to own an overseas home, after the UK, according to a wealth report out on Wednesday.

Such findings came on the back of last year's 3.4 per cent rise in Singapore's luxury residential prices - luxury units being defined as at least S$2,500 per square foot in prime districts 1, 9, 10 and 11.

There are some 46,080 UHNWIs, each having a net worth of over US$30 million excluding their primary residence residing in Asia-Pacific, based on data from New World Wealth.

An analyst noted that Singapore continues to appeal especially to the Asian community to live, work and set up businesses. Districts 9 and 10 are still highly favoured by the ultra wealthy given their prime location, close proximity to high quality amenities and schools.

The overall slide in property prices due to the government's cooling measures has also enhanced the value proposition of Singapore property, with demand for property gradually returning as seen in the improved transaction volumes last year. Singapore’s 15 per cent additional buyer's stamp duty on foreigners is looking cheaper compared to Hong Kong's 30 per cent. Meanwhile, there is risk of China introducing more property cooling measures to rein in prices, especially in first-tier cities.

The results were based on responses from almost 900 of the world's leading private bankers and wealth advisers, representing over 10,000 clients with a combined wealth of around US$2 trillion.

Among investable asset classes, real estate investments came top of the list for Asians' wealth allocation at 29 per cent compared to the global average of 24 per cent. With the ultra-rich citing wealth preservation as the most important factor in investment decisions, Singapore's attraction as a safe-haven amid global uncertainties will continue to play out.

Chinese nationals were the top foreign buyers in the residential market here since Q4 2015. Sustained buying interest from Chinese nationals is expected to sustain despite recent curbs on capital outflows. This, coupled with improved buying interest from Malaysians and Indian nationals this year, could raise the proportion of foreign home buyers to 28 per cent this year from 25 per cent in 2016.

Singapore's 23rd ranking on the Prime International Residential Index (PIRI), which tracks the value of luxury homes in 100 key locations worldwide, on the back of the 3.4 per cent rise in luxury home prices, reflects the immense value proposition that it has to offer to the ultra-wealthy. It was in 81st position for 2015 due to a 2.1 drop in luxury home prices that year.

The value proposition becomes more pronounced when seen vis-a-vis the surge in prices in key cities in China and Australia.

Luxury home prices in Shanghai defied property cooling measures with a 27.4 per cent surge last year, putting the city at the top on PIRI; two other Chinese cities Beijing and Guangzhou were ranked second and third for the respective 26.8 per cent and 26.6 per cent growth. London's 6.3 per cent drop in luxury home prices translated to a 92th position on the PIRI.

It was the 3 per cent hike in stamp duty for additional homes introduced in April 2016, rather than the UK's decision to leave the EU, that reined in demand in London. But the tail end of 2016 saw an uptick in sales volumes and improved sentiment as the market readjusted to the new tax burden.

20 prime city markets were selected and it was calculated, based on the typical luxury residential value for each city and the exchange rate at the end of 2016, how many square metres US$1 million can buy in each city.

As of end-2016, the most expensive prime homes - generally defined as the top 5 per cent of each market by value - turned out to be Monaco, Hong Kong, New York, London and Geneva, followed by Singapore.

Adapted from: The Business Times, 2 March 2017