As foreign buyers return, residential projects in Core Central Region could be back in vogue

Oct 20, 2021

AS easing travel restrictions bring travel flows back to the city-state, developers with projects in the Core Central Region (CCR) should benefit from a pick-up in demand. This comes as strict border curbs over the last 18 months or so have largely kept foreign buyers at bay, with sales in the CCR lagging behind the city fringe and suburbs.

From Oct 19, vaccinated travellers from 11 markets are able to enter Singapore quarantine-free as nine new vaccinated travel lanes (VTLs) across Europe, North America and South Korea (from Nov 15) join the two existing VTLs from Germany and Brunei.

While Singapore is taking a cautious approach by capping the daily number of incoming travellers across the VTLs to 3,000 arrivals, this is widely seen as a starting point, and international travel is likely to gain traction as more VTLs are launched in the months ahead.

The introduction of VTLs allows foreign buyers back into a market that has been predominantly domestic for most of the year, while Singapore's reputation as an attractive, stable destination for property investment has been strengthened amid the pandemic, according to Knight Frank's head of research Leonard Tay. He expects overall sales volumes for the private residential market to strengthen - more specifically, for the CCR, which hasn't performed as well as the Rest of Central Region (RCR) and Outside Central Region (OCR).

Primary sales in the CCR from January to September this year totalled around 2,000 units, versus over 4,000 new homes sold each in the RCR and OCR, Tay highlighted.

Properties located in the prime districts - such as luxury homes - typically do well with foreign buyers and investors, and have felt the brunt of the border closures that kicked in from March 2020.

According to data collated by Knight Frank this month from the Urban Redevelopment Authority's Realis platform, the percentage of private homes purchased by Singaporeans stood at 83.1 per cent in Q3 2021. The percentage of non-Singaporeans (foreigners and permanent residents) was 16.5 per cent. The remaining buyers include corporates and unspecified transactions.

This marks a shift from pre-pandemic times, when the percentage of private homes bought by Singaporeans stood at 80.2 per cent in Q3 2019 while that of non-Singaporeans was 18.8 per cent.

Property analysts also say that Singapore's transition from pandemic to endemic living should include an easing of restrictions, which should keep the momentum in the housing market going. In September, developers held back major launches as the surge in Covid-19 cases once again gave rise to more restrictive safe-distancing measures.

Nonetheless, in the primary market, developers have already sold 10,111 new private homes in the first three quarters of this year - surpassing the 9,982 units moved in 2020 as a whole - with JLL projecting that the total tally for 2021 could clock as much as 12,000 to 13,000 units. That would suggest a banner year, with the best performance since 2013 when 14,948 new private homes were snapped up.

Pent-up demand

Derek Tan, property analyst at DBS, said: "Once we normalise travel, there will be demand for Singapore property from foreigners looking to establish their homes here. There's a lot of pent-up demand from the likes of Indonesia, China and Hong Kong."

Among the potential stock market beneficiaries are City Developments (CDL) and Bukit Sembawang Estates, which are both marketing residential projects in the CCR.

At the same time, CDL - together with CapitaLand - is poised to launch the residential component of the Liang Court redevelopment, the 696-unit Canninghill Piers, in the fourth quarter of this year. While in the RCR, the highly anticipated project should draw interest as it is part of an integrated development.

The rebound in international travel should also provide a fillip for developers with exposure to the hospitality sector, such as CDL, CapitaLand Investment (CLI), Frasers and UOL, reckons DBS'sTan.

As travellers eagerly take to the skies once more, such developers - especially those with a diversified hospitality footprint - should see their hospitality arm improve, delivering some much needed relief after a harrowing couple of years.