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Singaporeís economy, after being damaged by the global economic crisis, is finally back on its feet. As a result, substantial confidence has returned to the real estate market, improving the reputation of Singapore as a core market for property investment. With first-hand experience, Healy Consultants are ideally placed to offer honest, practical and potentially cost-saving advice to international investors regarding the Singapore property market. The following will help you determine whether the Singapore property market should be part of an investment strategy to fulfill your objectives:
Singapore is one of the most attractive cities to live in in Asia, making Singapore property popular among global investors. Mercer Human Resource Consulting rates Singapore as the world's 28th most livable country in its 2011 Quality of Living Survey. It's the highest ranked Asian city in the survey.
After several years' depression in the residential property market, the market Major projects such as the Integrated Resorts in Singapore have provided local employment opportunities and have underpinned the Singapore residential property market. The private residential market is expected to stay healthy in 2010 with another wave of activity possibly setting in after the Lunar New Year celebrations.
Foreign ownership of Singapore property is allowed. Singapore has experienced an influx of expatriates, and some foreigners have preferred to buy rather than face escalating rentals, especially if they are going to be in Singapore for more than a couple of years. Foreign buyers, including permanent residents, tendered 2,448 caveats for private homes in Q3 2009, the first step toward purchasing a home. The volume of caveats for Q3 was up from 1,807 caveats during Q2, and a mere 498 in Q1 2009, according to Savills. Permanent residents purchased 1,389 homes in Q3 2009. Foreign investors wishing to purchase Singapore real estate with land are required to obtain approval from the Singapore Land Authority (SLA). These ownership laws are governed by the Residential Property Act and have been in place since 1973.
Colliers Internationalís research showed average capital values of luxury and super luxury apartments rising at a slower pace of 2.4% QoQ to $2,852 per sq ft. Average gross rents remained relatively stable in 4Q 2009, inching upwards 0.8% QoQ to $5.54 per sq ft per month. upwards 0.8% QoQ to $5.54 per sq ft per month. Private home prices could rise by between 12% and 15% for the whole of 2010.
Historically, Singapore property market downturns are caused by property oversupply. According to the Urban Redevelopment Authority, at the end of fourth quarter of 2008 a total of 64,982 private housing units were uncompleted. Of these, 43,414 units were still unsold.
One such reference to significant declines in the luxury segment is from Nomura Equity Research, who forecast the average price for luxury property to fall 32% from the 2007 peak in the 2008-2010 period.
Important points to note regarding the Singapore property market include:

i) Home ownership rate in Singapore is high at 90% so citizens are not in a hurry if prices are not attractive, making fast capital appreciation unlikely.

ii) Even at the peak rental levels during 2008, Singapore rental yields average only 4 to 5%. Long-term forecasts are for further downward pressure due to increased housing supply.

The retail component of the Singapore commercial property market declined by 0.6% in the fourth quarter of 2008. The median rental for shop space in the Orchard area (Orchard), Rest of City Area (RCA) and Outside City Area (OCA) also decreased slightly to $10.90, S$6.80 and S$5.66 psf pm respectively in fourth quarter 2008, based on an Urban Redevelopment Authority (URA) report. The retail market is expected to remain stable, despite competition from additional supply that will come on stream over the next few years. Malls such as ION Orchard, Orchard Central and 313 @ Somerset are slated for completion by 2009.
Average prime first-storey monthly rents were at $42.40 psf in Orchard/ Scotts Road, $27.10 psf in other city areas and $33.70 psf in areas outside of the city. With increases in supply, rental costs are set to decline from 2009. This remains well below prime retail rents in Hong Kong (S$86.40 psf per month), London ($126.61 psf per month) and New York ($142.77 psf per month). That said, prime rents in Kuala Lumpur and Bangkok are lower than in Singapore.
Between 2008 and 2010 almost 7 million sq ft of retail space will come on stream in the Singapore property market. For example, almost 2 million sq ft of new retail gross floor area is set to open on Orchard Road area to 2011, up 33% on current retail space. Most new space will come from new mall launches such as Ion Orchard and Orchard Central in 2008. It is a decade since a new shopping mall was built at Orchard Road. In 2008 alone, 930,000 sq ft of new shops are expected to launch in Orchard and Scotts Roads.
Demand for space in the Singapore commercial property market has been driven by i) expansion from banks and financial institutions ii) low vacancy rates for office space supply. In the first quarter of 2008, the prime office space vacancy rate was just 0.6%. However, as indicated in the CB Richard Ellis, vacancies for the 3rd quarter rose to 1.2% which is the first time in two years that this figure had been higher than 1%.
According to a survey by CB Richard Ellis (CBRE), Singapore ranked 15th in the world for most expensive office rent as of May 2009. The Republic fell 6 positions from its 9th place spot in 2008. The same survey ranked Tokyo (Inner Central), London (West End), Moscow and Hong Kong as the top four most expensive markets in the world.
The tight supply within the Singapore commercial property market will be eased between 2008 and 2012 when an estimated 10.3 million sq ft of office space will come on stream in Singapore. The downturn in the economy could see the increased supply lead to downward pressure on rent.
Office supply in 2010 can already be seen surpassing office demand, causing overall rents in Singapore to decline. DTZ's 2010 Cost of Occupancy Report calculates that at -51% Singapore showed the largest decrease in occupancy costs in S.E. Asia.
Healy Consultants independently assists international property investors effectively and efficiently manage all aspects relating to the Singapore property market. Using the latest residential and commercial real estate market information, our firm offers reliable information on i) Singapore property cycles ii) the current and future outlook for Singapore property and iii) expected interest rate and currency movements and the potential impacts on the Singapore property market. Sources include reputable authorities including the Singapore Economic Development Board, the Urban Redevelopment Authority, the Land Transport Authority and the Monetary Authority of Singapore.
Contact Us
For further information on the Singapore property market, call our Singapore office at (+65) 67350120 or email us here
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