Analysis: Chinese buyers may wait for citizenship before buying property amid new cooling measures

Foreign buyers accounted for 259 private home transactions in Singapore in the first quarter of this year, surpassing the quarterly average over the past five years, with Chinese buyers forming the largest group. Analysts believe that following the implementation of the latest cooling measures in April, Chinese buyers will likely feel the biggest impact, and some may hold off on purchasing a property until they obtain Permanent Resident (PR) or Singapore citizenship status.

According to the latest report citing Urban Redevelopment Authority (URA) data, foreign buyers represented 6.9% of all private home buyers in Q1, the highest proportion since Q1 2018. Chinese buyers remained the largest foreign demographic, accounting for 32% of total foreign purchases, followed by Indonesian buyers at 29%.

Including PRs, Chinese buyers picked up 316 units in Q1. Of these, 111 units were in the Core Central Region (CCR), which represents luxury private residences, making up 10.8% of total sales in the area.

The report noted that the doubling of Additional Buyer's Stamp Duty (ABSD) for foreign buyers from 30% to 60% last month will hit Chinese buyers the hardest. Since the new cooling measures do not affect first-home purchases by PRs and Singapore Citizens, Chinese buyers looking to reside in Singapore long term may choose to wait until they secure PR status or citizenship before entering the private residential market. Consequently, the proportion of transactions by PRs is expected to climb in the future.

Other foreign buyers may adopt a similar approach, meaning the government's latest cooling measures could inadvertently serve to encourage foreign buyers to apply for Singapore Permanent Residency or citizenship.

While the new cooling measures are set to dampen the volume of foreign private home purchases in the near term, Singapore's political and business stability, along with its high-quality education system, remain major draws over and above the ABSD. Foreign and PR home purchases are anticipated to rebound before the year ends.

Although Hong Kong property prices remain higher than Singapore's, the steep hike in ABSD could prompt some foreign buyers to turn their attention toward the Hong Kong housing market.

Foreign Purchases of Luxury Private Homes Hit Near 10-Year High

The report also highlighted that foreign purchases of luxury private homes in the CCR reached their highest level in nearly a decade in the first quarter, surging 123.9% from 71 units in Q1 last year to 159 units in Q1 this year. Over the past year, foreign buyers accounted for 43.9% of luxury condominium transactions priced at $10 million and above, and 33.2% of private homes priced between $5 million and $10 million.

Given the high concentration of foreign buyers in the luxury segment, the report indicated that the new cooling measures will exert a heavier drag on prime residences. By contrast, properties below $5 million are predominantly acquired by locals who pay lower ABSD rates, resulting in limited fallout for sales in this bracket over the coming months.

In addition, the report noted that US buyers—who enjoy the same ABSD treatment as Singapore Citizens under their Free Trade Agreement (FTA)—will be the least affected among the top five foreign buyer nationalities.

The number of US buyers purchasing luxury private homes has been charting an upward trend, rising from 120 units in 2021 to 147 units last year. In Q1 this year, transactions reached 36 units, up by five units from the previous quarter.

It would come as no surprise if US buyers rise to the top spot in the months ahead.

Nevertheless, compared to other foreign nationalities, Chinese buyers are still expected to remain the largest contingent. Moreover, many US buyers acquiring local private homes are new Asian immigrants hailing from China, South Korea, Taiwan, and Vietnam.