Nearly 1 in 2 people still looking to buy a private home: Survey

By Feily Sofian,

Esther Hoon

/ The Edge Property |

August 5, 2016 10:00 AM SGT

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Homebuyers are upbeat about the prospects of Singapore’s residential market in the long run. About 43%, or 217, of the 500 respondents polled in a recent survey shared that they were on the lookout to purchase a private home in Singapore. The survey was jointly conducted by property consultancy firm Knight Frank and The Edge Property over a one-month period starting from June 10. Interestingly, 59% of the 217 respondents who plan to purchase a private home currently own an existing property in Singapore, mainly an HDB flat, while another 21% own more than one property.

Regardless of their intention to purchase a private home, a vast majority, or 87% of the 500 respondents, believed that Singapore residential property makes a good investment, citing potential capital appreciation as well as the country’s stability and renowned status as a gateway city and financial hub (see Chart 1).

The minority, or 13% of respondents who were less sanguine about Singapore properties, was mostly concerned about the large supply of homes, which would dampen rental yields. The market has seen the new supply of residential properties outstripping population growth in recent years. This trend is likely to continue over the next few years, says Knight Frank.

However, the property consultant highlighted a pickup in purchases by foreign nationals this year, which further underscores investor confidence in Singapore as a safe haven.

A total of 1,932 caveats were lodged by foreign nationals, comprising permanent residents and non-PRs, for private non-landed homes in 1H2016. This was 20% higher than the 1,608 caveats lodged in the same period last year (see Chart 2). The proportion of foreign purchasers has remained largely unchanged from last year because the number of Singaporean purchasers has also increased.

“The rising number of foreign homebuyers in recent quarters reflects the revival in interest in Singapore residential property over other overseas properties, given higher currency volatility, a less transparent system and tax considerations in other markets,” notes Alice Tan, head of research at Knight Frank Singapore.

Projects that drew a high proportion of foreign purchasers in 2Q2016 include Ardmore Three, Cairnhill Nine and OUE Twin Peaks. Interestingly, some projects in the city fringe and the suburb have also attracted keen interest from PRs and non-PRs alike. At Lakeville on Jurong Lake Link, foreign purchasers accounted for 40% of the 40 caveats lodged in 2Q2016 — 15% by PRs and 25% by non-PRs. Similarly, 47% of the 51 caveats lodged for Symphony Suites units in 2Q2016 were by foreign nationals.

Cautious interim outlook

In the short term, however, a confluence of factors, including a frail economy, job uncertainties and the additional buyer’s stamp duty (ABSD) is deterring aspiring home buyers from signing on the dotted line. The recent uptick in sales was mostly driven by price incentives and projects with strong location attributes.

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Hence, among the 217 respondents who aspire to buy a private home, only 51, or 24%, were likely to purchase their dream home over the next 12 months. Meanwhile, 107 respondents, or 49%, said they might take up to 24 months to commit. The remaining 59 respondents, or 27%, could take longer than 24 months to ink a deal.

When questioned on the outlook for the Singapore economy and residential market, half of the 217 respondents believed prices will continue to fall over the next 12 months. A bigger percentage of respondents said the Singapore economy would fare worse in 2016 compared with last year. Beyond the next 24 months, however, 61% of respondents believed that prices would begin to recover.

Rising job uncertainties are also keeping homebuyers on the sidelines. Singapore’s unemployment rate crept up from 1.9% in March to 2.1% in June, according to preliminary estimates released on July 28 by the Ministry of Manpower. About 68,300 residents were reported to be unemployed as at June, up from 60,400 in March.

The survey also suggests that the ABSD continues to deter buyers from committing. About 58%, or 125 of the 217 respondents, would purchase a private home within 12 months if the ABSD was more favourable, up from 24% earlier.

For some buyers, the challenging market presents an opportunity to unearth value deals. Among the 51 respondents who are prepared to commit in the next 12 months, 65% believed there are good property investment opportunities to be uncovered in this period. The percentage is lower among the 107 and 59 respondents who might take up to 24 months or more to buy their property, at 53% and 39% respectively.

Tan says the optimism about Singapore’s property market prospects shown by a high proportion of aspiring homebuyers is fuelled mainly by our long-standing attributes. The city state’s status as a safe haven for asset investments, the government’s proactive strategies to advance real estate development and the stable Singapore dollar all combine to strengthen investor confidence in the property market.

Tan attributes homebuyers’ optimism to Singapore’s safe-haven status, the
government’s proactive strategies to
advance real estate development and
a stable Singapore dollar

“However, headwinds persist for residential property, in particular uncertain economic performance, job security concerns and the prolongation of property cooling measures. Despite these challenges, interest in Singapore residential property is anticipated to be sustained in 2H2016, especially for properties in the city centre and fringe locations, as unsold inventory and upcoming launches taper off and pent-up demand swells three years after the imposition of the total debt servicing ratio (TDSR). The continuing search for stable property investment by both local and foreign investors would support Singapore as one of the property destinations of choice,” notes Tan.

Owing to economic uncertainties and the ABSD, most respondents will likely take up to 24 months or longer to commit to buying a new property

Homebuyers’ wish list

Expectedly, condominiums and apartments emerged as the most popular choice of private homes, with 199 of the 217 respondents considering to purchase them. Eight respondents would only consider landed properties, either strata or conventional landed homes.

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Overall, private homes priced between $1 million and $1.5 million appear to be the preferred choice among homebuyers, with 42% of the 217 respondents targeting to buy within this range (see Chart 3). The trend was observed across income bands, including among respondents with a high gross household income of above $16,000 and $20,000 a month. Properties priced between $500,000 and $1 million came in second, with 28% of respondents indicating this price range as their preferred choice.

Analysis of URA caveats supports this trend. At least since 2011, private non-landed homes priced between $1 million and $1.5 million have accounted for the bulk of resale and sub-sale caveats lodged annually. In the primary market, however, units priced between $500,000 and $1 million formed the majority of new sale caveats for private non-landed homes annually over the same period. This might be owing to the relatively smaller units offered in new projects.

The top three household income ranges among the 217 respondents who aspire to own a private home are $8,001 to $12,000 (21%) $12,001 to $16,000 (20%) and $5,001 to $8,000 (20%). Notably, 18% of respondents reported a household income of above $20,000.

Nearly half of the 217 respondents were married with one to two children, which explains a higher preference for three-bedroom units (see Chart 4). While the TDSR has been blamed for the slower take-up of bigger units in new projects, perhaps the design and efficiency of the units in some projects or the size of the internal space could be enhanced for this group of buyers.

This article appeared in The Edge Property pullout, Issue 740 (Aug 8, 2016) of The Edge Singapore.

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