Time to ease curbs on foreign buying of landed homes: Report

Published June 26, 2007

Call to allow foreigners to buy landed homes

By KALPANA RASHIWALA


(SINGAPORE) Goldman Sachs (Singapore) has argued a case for lifting restrictions on foreigners buying landed homes in Singapore, saying this would serve as a catalyst for further foreign buying of private homes and boost the current residential property upcycle.

Its analysis shows that the average price of a top-end bungalow (with a 15,000 sq ft land area) is about $17 million - or 35 per cent below that of a comparable condominium (a 7,500 sq ft unit priced at $3,500 psf), which goes for about $26.3 million.

'We think this price gap can narrow to parity or very close to it, should the restrictions on foreign ownership of landed properties be relaxed,' the bank said in a research note dated June 24.

'In the event of an across-the-board relaxation of restrictions for landed property, we believe the positive effects would be two-fold: (1) developers with landbank for landed developments would benefit; and (2) all residential developers could gain from even greater foreign buying interest given the positive message such a move would send,' it said.

Although the government has made no announcements on the subject, 'we see the possibility of the government relaxing restrictions on foreigners buying landed property as higher than previously, because: (1) discussions with developers have affirmed our view of foreign interest in landed property, and (2) the tone of government policy changes has been firmly pro-immigration ... We think relaxing restrictions on foreigners buying landed property would accelerate Singapore's efforts to attract foreign talent,' Goldman Sachs said in the research note.

'In our view, foreigners would like the flexibility of greater choice of housing and the positive signal of Singapore's open door policy emanating from such a move,' Goldman Sachs argued. It added that a relaxation on foreign buying of landed homes would not hurt the national objective of giving Singaporeans a stake in the country by being able to buy and own residential properties at affordable prices as the public housing market addresses this objective.

In the first quarter of this year, foreigners accounted for 26 per cent of buyers of private homes, up from 23 per cent in 2006 and 21 per cent in 2005.

Under the Residential Property Act, foreigners (including permanent residents) are prohibited from buying landed property without prior approval from the government.

Foreigners have to be PRs before they can receive permission to buy landed homes on mainland Singapore; Sentosa Cove is the only location where foreigners who are not PRs are allowed to purchase landed property.

Foreigners, including PRs, can at any one time own only one landed home in Singapore and must occupy it themselves rather than rent it out.

Among the criteria that the Minister for Law will consider when asked to approve foreigners buying a landed home are the applicant's qualifications and whether the applicant has made, or will be able to make, adequate economic contribution to Singapore.

However, foreign buyers may acquire an unlimited number of non-landed private homes - condominiums and apartments.

Goldman Sachs acknowledged that 'for now, we note there is still no certainty of any policy change and the nature of change could be restricted to select types of landed property like Good Class Bungalows or cluster housing'.

The bank's analysis of 36 landed property transactions at Sentosa Cove between January 2005 and May 2007 showed that Singaporean and foreign buyers each accounted for 44 per cent of purchases, with the balance accounted for by companies.

In contrast, Goldman Sachs' study of islandwide private home transactions between January and May this year showed that foreign buyers accounted for just 8 per cent of total landed property deals, lower than their 29 per cent share of non-landed home purchases over the same period. This suggests the scope for a higher share of foreign buying if the landed private housing sector is also opened to foreigners.

'We think relaxing restrictions on foreigners buying landed property would not adversely impact demand for condominiums and apartments, given the positive signal such a move would send to foreigners,' the bank said. 'Moreover, we look for a positive spill-over from rising landed property prices to condominiums and apartments.'

Goldman Sachs estimates about 2,800 landed homes with written permission for development, the bulk (2,565 units) of which have yet to be sold, will come on stream over the next few years.

This supply is almost 4 per cent of the current stock of landed homes in Singapore.

Among the developers with exposure to landbank slated for residential housing are Bukit Sembawang, Allgreen Properties, MCL Land, Fragrance Group, and Sing Holdings.

Lift curbs on sale of landed properties to foreigners, says Goldman Sachs
By Joseph Yadao, TODAY | Posted: 26 June 2007 1013 hrs

SINGAPORE: In the eyes of some, at least, there may never be a better time to slaughter one of the sacred cows of the landed home market.

The idea of owning a nest in Singapore is becoming increasingly attractive to foreigners. The Government, too, has been effusive in its efforts to draw foreign talent here to build the economy. So why not relax restrictions on the sale of landed property to foreigners — and satisfy both needs at one go?

Making this controversial proposal in a report released on Sunday, Goldman Sachs — one of the world’s largest investment banks — cited suggestive figures.

The proportion of foreigners buying private homes here climbed to 26 per cent in the first quarter of the year, up from 21 per cent in 2005. But as of May, foreigners were involved in only 8 per cent of landed property transactions this year — compared with 29 per cent of apartment transactions.

The average price of a top-end bungalow falls short of that of a luxury condominium unit by about 35 per cent.

“We think this price gap could arrow to parity, or very close to it, should restrictions on foreign ownership be relaxed,” said the report, adding that “foreigners would like the flexibility of greater housing choice and the positive signal of Singapore’s open door policy emanating from such a move”.

But the argument will be a thorny one for the Republic to swallow, given the socio-political barbs of such a move. And going by industry players’ reactions, the debate is likely to remain an academic one.

Since 1973, the Residential Property Act has restricted foreigners and permanent residents from owning private residential property without prior official approval — and for good reason.

“The restrictions on foreign ownership of landed property is unlikely to be eased because it is an emotional issue. It involves (putting) a tangible, physical part of Singapore in foreign hands,” said Mr Colin Tan, director for research and development at Chesterton International.

“Landed properties should not be priced out of Singaporean’s reach (or) it could lead to disgruntled Singaporeans, which would be a cause of concern for the Government,” said Mr Charles Chong, chairman of the Government Parliamentary Committee for National Development and Environment.

Even so, a concession was made in 2004 for Sentosa Cove, where potential foreign buyers were given fast-track approval. Of the 36 landed transactions at Sentosa Cove, 44 per cent involved foreigners. A seaview bungalow plot within the luxury enclave set the record at $1,308 per square foot.

But that is most unlikely to herald any universal lifting of control over landed property ownership in Singapore, say property analysts. Goldman Sachs argues in its report that removing such restrictions would not hurt the national objective “of giving Singaporeans a stake in the country”; neither would it price them out of the market.

It reasoned that the public housing market met the needs of 80 per cent of Singaporeans by making affordable homes available.

The report also conceded that any policy change could be limited to selected types of landed property, such as good-class bungalows.

But Mr Ku Swee Yong, director of marketing and business development at Savills Singapore, argued that the influx of buyers would give landed-property owners the upper hand in this land-scarce environment. “It would be a sellers’ market. This will definitely have an immediate impact on prices,” he said.

According to forecasts released by property firm CB Richard Ellis yesterday, home prices are estimated to have risen by 4 to 6 per cent between April and June, and they are expected to climb by another 3 to 5 per cent.

One driving factor: The limited supply of new homes in the $600 to $800 per sq ft price range.

Mr Nicholas Mak, KnightFrank’s director of research and consultancy, said: “Prior to the Residential Property Act, rich Indonesians snapped up properties, pricing Singaporeans out of the market. Today, high-end property prices are up. That is starting to filter down to the mid-tier properties.”

He added that keeping certain privileges of home ownership for citizens only “encourages foreigners to commit to Singapore, to sink their roots here”.

Chesterton’s Mr Tan added: “Some things have to be preserved for Singaporeans. Landed property ownership is one of them. It is the privilege of being Singaporean.” - TODAY/fa

June 27, 2007

Time to ease curbs on foreign buying of landed homes: Report


SINGAPORE'S increasing popularity with foreigners could signal that it is time to relax restrictions on overseas ownership of landed properties, according to a Goldman Sachs report.

The giant investment bank said in a research note that if curbs are relaxed across the board, it could spur further foreign buying of private properties.

It could also boost the residential property market by having 'positive spillover from rising landed property prices to condominiums and apartments'.

The United States bank said the average price of a top-end bungalow is 35 per cent lower than that of a comparable condominium, which sells for about $26.3 million.

'We think this price gap can narrow to parity or very close to it should the restrictions on foreign ownership of landed properties be relaxed,' it said.

Under the Residential Property Act, foreigners and permanent residents are forbidden from buying landed property without government approval.

And a foreigner who does win approval can own only one landed property at a time and they must occupy the home, not rent it out.

If the rules are relaxed, developers with land banks for landed projects would benefit, the bank said.

Meanwhile, all residential developers could also 'gain from even greater foreign buying interest given the positive message such a move would send'.

A land bank is a stock of land with planning permission already granted but where development has yet to occur.

Goldman reasoned that removing such curbs would not hurt the national objective 'of giving Singaporeans a stake in the country by being able to buy and own residential properties at affordable prices'.

It said the possibility that the Government would loosen its reins on the land restrictions is higher now.

Goldman cited its discussions with developers which have affirmed its view of foreign interest in landed property.

The bank also referred to a change in the tone of government policy which has become firmly pro-immigration, it said.

'We think relaxing restrictions on foreigners buying landed property would accelerate Singapore's efforts to attract foreign talent,' Goldman said, though it acknowledged that for now, there is 'no certainty of any policy change'.

Goldman has estimated that about 2,800 landed homes with written permission for development will be let out into the market over the next few years.