Property market heats up: prices expected to rise by 10% in 2018

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Thinking of buying property in 2018? You might just want to do so sooner rather than later, as analysts are predicting that prices in the property market will increase by up to 10% in the coming year.

Despite the property cooling measures which are in place, UOB Kay Hian expects home prices in Singapore to climb by 5 to 10% in 2018. Morgan Stanley concurs, predicting that property prices will increase by 10% by the end of 2018.

According to Vikrant Pandey, Director, Asean & Hong Kong Property and REITs of UOB Kay Hian, the increase in property prices is likely to be fuelled by mid-range and high-end segments. This will be driven by “replacement demand from redevelopment of old housing projects, and a pick-up in home-buying interest from foreigners”, according to Pandey.

Why are foreigners expected to contribute significantly to the property market in the upcoming year? Singapore’s Additional Buyer’s Stamp Duty (15%, to be precise) levied on foreigners is relatively conservative when compared against Hong Kong’s stamp duties on foreign property buyers (which recently doubled to 30%), as well as Taiwan’s punitive divestment-gains tax (up to 45%).

According to statistics by the Urban Redevelopment Authority (URA), purchases by foreigners increased by 48% from the first half of 2017, as compared to that of 2016. In addition to this, purchases by permanent residents also rose by 32% during the same time period. Property purchases by foreigners are driven predominantly by the Chinese, Malaysians, Indonesians, Indians and Americans – here’s what they’re buying in the local property market:

#1: Chinese

Given that China’s economy is booming, this probably doesn’t come as a surprise. According to statistics from URA, properties costing between $500,000 and $1 million are the most popular amongst Chinese buyers; this is closely followed by properties ranging between $1 million and $1.5 million. Chinese buyers also favour properties in districts 5, 19, and 23.

#2: Malaysians

Similar to the Chinese, Malaysian buyers are predominantly snapping up properties which range between $500,000 and $1 million. Their preferred locations are districts 18, 19, and 27 (the latter consists of Yishun and Sembawang, which are nearer the Causeway).

#3: Indonesians

Whilst most Indonesians are buying properties which cost between $500,000 and $1 million, we’re now seeing more of them (11%, to be precise) purchasing higher end properties costing upwards of $3 million. In addition to this, 10% of Indonesian buyers are sinking their cash into properties which cost $5 million and above. Amongst Indonesians, the most sought-after locations are districts 9, 10 and 19.

#4: Indians

Indian investors tend to favour city fringe developments, which are located reasonably near the Central Business District without being priced at a premium. The majority of Indian investors are purchasing properties in districts 15, 16 and 18, and the average Indian investor goes for properties within the $500,000 to $1 million range.

#5: Americans

American investors, who are eligible for ABSD remission, have consistently been one of the top foreign purchasers of property in Singapore. Perhaps it’s due to the fact that they aren’t liable to pay the ABSD, but American buyers tend to spend more on property, with the majority of them purchasing properties which range between $1 million and $1.5 million. They also favour properties in prime districts, including districts 9, 10, and 15.

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