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Domestic demand boosts Singapore property growth

Growing population and low interest rates are strengthening the sector, writesJosephine Bond

PUBLISHED : Thursday, 16 August, 2012, 12:00am
UPDATED : Friday, 07 September, 2012, 11:38am

Singapore's property market is continuing to attract buyers and investors amid record-low borrowing costs and robust demand from its growing population.

Although home prices are expected to remain relatively flat this year, as global economic uncertainty prevails, private home prices edged up 0.4 per cent in the second quarter of the year, according to the Urban Redevelopment Authority.

Demand for residential homes remained intact despite a series of cooling measures implemented by the government last year, thanks largely to a low-interest rate environment and population growth that has increased by 25 per cent over the past decade.

Primary home sales have been witnessing stellar growth despite concerns over the Additional Buyer's Stamp Duty (ABSD) - brought in last December as a cooling measure - and uncertainties in stock markets and excessive investment demand.

According to Knight Frank Singapore, developers launched and sold a record number of new homes in the first five months of this year, an increase of 54 per cent compared to the same period last year.

On the retail side, the leasing and sales markets are picking up pace despite sluggish rents as tenants compete for prime spaces.

According to research by Colliers International, the three months ending June this year saw leasing activity pick up.

"Much of this activity was witnessed in the newer malls as a varied mix of new-to-Singapore brands and food and beverage operators sought to strengthen their present positions along Orchard Road and to set up branches in suburban regional centres and other niche locations throughout the island,'' the report says.

Orchard Road saw the recent additions of luxury lifestyle brands Tory Burch and TAG Heuer, while deli giant Dean & DeLuca took over 3,200 sq ft of space in Orchard Central in June.

Colliers expects the retail property market to continue to be supported by retail sales, with consumer sentiment expected to remain positive and a steady flow of tourists providing a boost to the sector.

Given the line-up of meetings, incentives, conventions and exhibitions, such as the Formula One in September, Singapore should meet the Singapore Tourism Board's (STB) projection of 13.5 million to 14.5 million visitors this year, Colliers says.

"Sustained retail sales growth should continue to stoke retailers' confidence and prop up demand for retail space," Colliers says in its research note.

"Coupled with Singapore's steadily solidifying status as a cosmopolitan international city and a gateway to Southeast Asia, more retail brands will be attracted to make inroads into the city state."

According to research by CBRE, a global real estate services adviser, the retail property sector will remain stable for the next six to 12 months, given the swelling number of tourists and increased domestic spending.

"Despite the flurry of leasing activities in the market, landlords remain cautiously steadfast in their rentals," CBRE says. "Looking ahead, the Singapore retail market is expected to continue to attract new retailers and concepts as it matures through globalisation."

Office rents have seen a marginal softening this year, but Colliers believes this could bode well for the market "since it improves Singapore's competitive edge as an attractive office location in the region". The office sector beat expectations with stronger leasing performance in the second quarter of 2012, according to a CBRE research note.

"A few occupiers have taken advantage of the relatively high availability of grade A space at competitive rents and 'flight to quality' has been a key feature," the note says.

Singapore has become an attractive regional hub for businesses and companies, with more than 200 financial institutions setting up base.

Marina Bay Financial Centre (MBFC), a consortium of Cheung Kong (Holdings), Hongkong Land and KeppelLand, for example, has attracted financial institutions such as Standard Chartered Bank, DBS and American Express to its location in Marina Bay.

It in part credits the success of Marina Bay to the government's commitment to develop the area as the "New Downtown".

"The Singapore government continues to build on its efforts to ensure Singapore's place as the financial capital of Southeast Asia and a key hub in the world financial system," says an MBFC spokesman.

"With the growing number of leading MNCs [multinational corporations] investing in Singapore in recent years, we have seen a huge demand of newly completed grade A office space."

This in turn is spurring demand for luxury homes as foreign high net worth individuals - particularly from China, Hong Kong, Indonesia and Malaysia - look for investment opportunities.

"In the high-end residential space, ultra high net worth individuals continue to view luxury homes in Singapore as a sound investment," the spokesman notes.

Singapore property investment sales have seen a strong rebound in the second quarter of 2012, according to Colliers, jumping 85 per cent to S$8.71 billion (HK$54.4 billion) in the quarter ending 30 June compared with the previous quarter.

In the first six months of this year, the total investment sales value was S$13.42 billion.