by Nicholas Mak and Ethan Hariyono
Recent news has been pointing towards US citizens' increased activity in the Singaporean property market and the possibility of edging China out as top players. MOGUL.sg dives into the details and dispels any myths surrounding this hot topic.
Introduction
Earlier this year, we did a brief analysis on China being the largest property foreign buyer group, and the resulting impact it has on our local property market. Since then, Singapore has engaged in another round of property cooling measures specifically targeted at increasing stamp duty taxes and curbing the participation of foreigners and companies in local property transactions.
This new set of property curbs took everyone by surprise, seeing that it doubled an already hefty 30% additional buyer’s stamp duty (ABSD) to a whopping 60% for foreigners. This should result in a large number of foreigners being discouraged from purchasing a property here - which is what the government set out to achieve.
An ABSD-free zone?
However, there are 5 countries that hold a free trade agreement with Singapore - which states that like Singaporean Citizens (non PRs), they are able to purchase their first residential property with no ABSD, effectively saving on the additional 60% compared to other foreigners.
The 5 countries mentioned are Norway, Iceland, Switzerland, Liechtenstein and the United States of America. The USA stands out from the list, being the largest country of all, with the most number of expatriates and nationals working in Singapore. Currently, foreigners from China are the largest group of buyers in residential properties here. It is interesting to note that there have been recent speculations that foreigners from the USA will come to overtake foreigners from China as the largest group of private residential property buyers in Singapore.
Why is Singapore so popular amongst Chinese citizens?
There are a few large foreign buyer groups in Singapore, listed in descending order below:
Nationality (by country) | 2019 | 2020 | 2021 | 2022 | 1Q 2023 | Total |
China | 1,153 | 1,047 | 1,740 | 1,381 | 316 | 5,637 |
Malaysia | 630 | 564 | 1,074 | 843 | 159 | 3,270 |
India | 320 | 396 | 695 | 476 | 115 | 2,002 |
Indonesia | 256 | 202 | 365 | 268 | 56 | 1,136 |
USA | 145 | 164 | 269 | 308 | 73 | 959 |
From this table, we can easily infer that Chinese citizens have by far dominated the residential property foreign buyer group in Singapore.
Looking at data since 2013, the majority of Singapore private residential property buyers who are Chinese citizens are also Singapore permanent residents (SPR).
Among the 13,883 recorded private housing units bought by Chinese citizens, 9,605 units or 69% of the properties were bought by SPR with Chinese passports. The remaining 31% of the private housing units were purchased by Chinese citizens who are not SPR, in other words, non-PR (NPR) foreigners from China.
This large number of Chinese residential property buyers can be attributed to a multitude of factors:
Singapore is one of the closest trade hubs to China, and the most strategic location for those considering a move to South-East Asia.
This is further compounded by Singapore’s policies making it a tax haven for businesses. This combined with Singapore’s strong economy makes it an attractive place for Chinese businessmen and skilled workers to flock to.
Singapore has a majority Chinese population and various cultural similarities to China.
Singapore is single-handedly the most successful country with a majority Chinese-speaking population outside China.
USA citizens who bought properties In Singapore
Meanwhile, the reverse is the case for American buyers of Singapore private residential properties. More Singapore private housing units were bought by US NPR foreigners than their compatriots who are Singapore permanent residents - which is likely due to the negated stamp duty rates that are required to be paid by US citizens.
Americans may buy properties in Singapore because of the following reasons, which vary from those of Chinese nationals:
They work and live in Singapore.
They have some business or family connection to Singapore.
Their parents could be formerly from Asia (e.g. China, India, Southeast Asia) and they are naturalised Americans.
Over the same past decade, among the 1,876 recorded private housing units bought by US citizens, 1,370 units or 73% of the transacted units were bought by NPR from the US. The remaining 506 units or 27% were purchased by Americans who are also Singapore permanent residents.
There has been a noticeable increase in US citizens buying private housing units in 2021 and 2022. This can be attributed to the sharp increase in residential rental rates.
In the past two years, the private residential rentals increased at an unprecedented 42.5%. By comparison, the private residential property prices appreciated 20.1% over the same 2-year period.
Since Americans do not need to pay ABSD if they were to buy their first private residential property in Singapore, they may find that it makes financial sense to buy instead of rent - just like a typical Singaporean household. Furthermore, there could be a possible upside in capital gains should they decide to sell their property when they relocate out of Singapore.
Will the Americans become the majority residential property buyers in Singapore?
With the increase in purchase of private residential property by US citizens over the past 2 years versus a drop in purchases by Chinese citizens, some market watchers are quick to point towards a shift of the foreign buyer demographics.
The table below highlights the increase in American non-PR's buying more properties in 2022 as a direct result of the aforementioned increase in rental rates.
| Units bought by | | | Units bought by | | |
Year | NPR from China | SPR from China | Total units bought (China buyers) | NPR from USA | SPR from USA | Total units bought (USA buyers) |
2019 | 342 | 816 | 1,158 | 110 | 37 | 147 |
2020 | 241 | 814 | 1.055 | 115 | 50 | 165 |
2021 | 373 | 1,378 | 1,751 | 195 | 76 | 271 |
2022 | 267 | 1,123 | 1,390 | 252 | 57 | 309 |
Up to May 2023 | 128 | 288 | 416 | 76 | 16 | 92 |
| | | | | | |
Total (2013-2023) | 4,278 | 9,605 | 13,883 | 1,370 | 506 | 1,876 |
% of total | 30.8% | 69.2% | 100.0% | 73.0% | 27.0% | 100.0% |
Looking at the overall statistics, it is only in 2022 that the number of private residential property bought by NPR from the USA comes close to that of NPR from China (252 vs 267, respectively).
These figures merely represent the NPR who bought private residential properties here, and they are a small proportion of the entire buyer demographics. The sheer volume of purchases when compared in whole over the past 4 years up to 1Q2023 tells a consistent story - Chinese buyers are still contributing to the bulk of the purchases (5,637 units bought by Chinese citizens vs 959 units bought by American citizens).
While we might see stronger showings from American citizens purchasing private residential properties in the market since the recent increase in ABSD rates, the overall number of Chinese nationals who flock to Singapore and eventually become PRs (subsequently buying properties to support their long term residency here) makes it hard to ignore this group of potential buyers.
It may be a long while before the Americans become the top 3 group of buyers in Singapore’s private residential property market. In fact, the closest countries we can see providing any form of ‘displacing’ the Chinese citizens from Number 1 spot would be nearby Asian countries with cultural similarities and a high output of skilled workers, i.e. Malaysia, India and Indonesia. But once again if you look at the data available objectively: it is going to be some time before they could match up to the population and resource rich Chinese.
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