asian cities report singapore residential 1h...
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Asian Cities ReportSingapore Residential 1H 2012
Savills Research Singapore
savills.com.hk/research
1H 2012 Asian Cities Report | Singapore Residential
02
Introduction The threat of a recession stemming from problems in Europe and the US has intensified recently. The gloomy economic outlook, coupled with the latest round of private residential property curbs implemented on 8 December 2011, has dampened market sentiment. Bucking the trend is the leasing sector which continued to thrive, with both demand and rentals rising. Leasing volume has remained robust since the second half of 2010, on the back of the economic growth and increased expatriate hiring last year.
As many companies in the West pared headcounts to reduce costs, Singapore has seen a shift in employment patterns. Not only were there more job applicants from the West seeking employment in Asia, but companies there have also shifted their operations eastwards. Singapore’s strong immigration numbers and a possible spillover of leasing demand from foreigners affected by the latest round of property curbs are expected to lift the rental market further in 2012.
Historically high leasing transactions and transaction values Leasing volume for all private property types (excluding executive condominiums [ECs]) hit a record 45,062 transactions last year. This has surpassed the 41,573 and 39,819 leases inked in 2010 and 2009 respectively. In 2011, 34% of leasing transactions were in the core central region (CCR), a 6-percentage point increase from the economic boom in 2007, with the rest of central region (RCR) and outside of central region (OCR) both recording another 33% of leasing transactions. Compared with 2007, the proportion of leases in the OCR and RCR dipped 5 and 1 percentage points, showing that rental demand for high-end homes is rising as more expatriates relocate here. In fact, more higher-salaried expatriates
have been entering Singapore over the last few years as the biomedical, IT&T, banking and finance sectors transferred more of their staff from overseas to meet their expansion plans in Asia.
In the face of increasing leasing demand, landlords have raised rents. Property yields have therefore maintained, despite higher capital values. Rents for non-landed properties reached S$3.44 per sq ft per month in Q4/2011. Due to the higher rents achieved and a spike in leasing volume this year, the total transaction value for all property types (excluding ECs) hit a record S$218 million in 2011, surpassing the total transaction values of S$185 million and S$160 million for the full year of 2010 and 2009 respectively.
Strong immigration numbers According to the Singapore Department of Statistics (SDOS), Singapore received an average of 126,000 new immigrants per year from 2005 to 2011, comprising both permanent residents (PRs) and non-residents (excluding tourists and short-term visitors). As of 2011, immigrants constituted 37.2% of the total population – 532,000 PRs and 1.4 million non-residents.
Although the government has started to legislate new hiring regulations to reduce companies’ foreign worker dependency and to control the number of permanent residency approvals after this year’s General Election feedback, the Institute of Policy Studies (IPS) released a study in September 2011 citing that Singapore still needs 60,000 new migrants a year to keep the population young and economically active.
The number cited by the IPS was benchmarked against the 3.6 million Singapore citizens and PRs recorded in 2005. However, a net addition of 60,000 per annum
Source: URA, Savills Research & Consultancy
GRAPH 2
Median rents of non-landed homes (excl ECs), Q1/2007–Q4/2011
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007 2008 2009 2010 2011
S$
per
sq
ft
per
mo
nth
Source: Urban Redevelopment Authority (URA), Savills Research & Consultancy
GRAPH 1
Transaction volume, 2000–2011
7,0
68
8,6
26
5,9
25
6,3
96
7,0
62
7,5
99
8,8
07
6,8
15
6,2
34
9,5
79
9,3
47
10,
162
8,1
02
8,6
38
6,9
11
7,2
63
8,1
11
8,4
63
5,9
15
7,7
24
9,0
72
10,
327
11,
514
11,
623
9,2
05
7,7
88
7,3
76
8,3
44
9,0
28
9,9
17
7,6
77
8,7
26
10,
923
11,
478
10,
638
13,
028
7,9
30
5,8
24
6,0
37
6,4
31
7,2
56
7,8
95
6,5
29
5,6
75 8,8
96 8
,435
10,
074
10,
249
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Q1 Q2 Q3 Q4
No
. of
tran
sact
ion
s
Source: URA, Savills Research & Consultancy
GRAPH 3
Total transaction value of all property types (excl ECs), 2000–2011
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
S$
mill
ion
('00
0s)
1H 2012 Asian Cities Report | Singapore Residential
savills.com.hk/research 03
may be politically indigestible and a more palatable scenario of 25,000 per annum is used in our analysis. By including those granted employment passes (who are not PRs), assumed at 5,000 per annum, the net increase in foreigners would be 30,000 per annum. As these immigrants are young, their average household size is likely to be lower than Singapore’s average of 3.5. Assuming these new immigrants have a household size of 2.5, the 30,000 new immigrants could translate to an annual net incremental demand for 12,000 housing units. This could possibly be higher as the new batches of foreigners are likely to be single. From our computation, about 4.7% of new immigrants purchase homes (4,700 new units) while the rest would rent. This would mean a potential incremental rental demand of about 7,300 per annum.
Spillover demand after new property curbs Arising from the flow of excessive liquidity from the region, investment demand for private homes in Singapore has been growing. Being a small-sized market, Singapore would be exposed to more volatility as the global economy deteriorates. Private home ownership is also slipping beyond the reach of Singaporeans as home prices continue to rise unrelentingly. To ease the growth of foreign investments and to keep housing affordable for its citizens, the Singapore government has unveiled a slew of new property measures. The measures, which include an Additional Buyers’ Stamp Duty, act to curb excessive buying from foreigners, corporate entities and repeat purchasers. Effective from 8 December 2011, an additional 10% stamp duty is payable by corporate entities and foreigners purchasing any private homes, whereas PRs buying their second and subsequent residential property and Singaporeans buying
their third and subsequent property will pay an additional 3% over and above the existing stamp duties.
In the weeks following the implementation, buying activity from these groups of buyers dipped, especially in the luxury market where the bulk of sales come from foreigners. The leasing market will, however, stand to benefit from these new measures in the longer term as some foreigners and PRs may switch from buying a home to renting one, while some may extend their leases upon expiry. Current leasing volume is already at a record high and these measures could unwittingly give it a further boost in the coming months.
Growth potential and outlook Although many private homes are expected to be completed next year, which could exert downward pressure on rents, major declines are unlikely as demand is expected to remain robust due to immigration. As such, rents could see a mild correction of about 5% in 2012. As the budgets for expatriate housing shrink as part of cost-cutting measures adopted by many multinational companies, leasing demand could rise for smaller homes in the RCR and CCR, or for cheaper alternatives located in the OCR.
Source: SDOS, Savills Research & Consultancy * There was a drop in PR numbers, with some probably converting to Singapore citizenship.
GRAPH 5
Number of new immigrants, 2005–2011
-50
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011*
PRs Non-residents
Per
son
('00
0s)
Average = 126,000
Source: IPS, Savills Research & Consultancy
GRAPH 4
Singapore resident population, 2005–2050
0
1
2
3
4
5
6
7
8
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
0 net immigration 30,000 net immigration 60,000 net immigration Rising fertility rate
Mill
ion
Source: SDOS, Savills Research & Consultancy
GRAPH 6 PRs and non-residents as % of total Singapore residents, 1980–2011
0%
10%
20%
30%
40%
50%
60%
1980 1990 2000 2005 2006 2007 2008 2009 2010 2011
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