Last year marked a historical high for foreign property buyers in Singapore, led by mainland Chinese, Malaysians, Indonesians and Indians, according to property consultancy Savills Singapore.

Compared to all other foreign buyers, Indonesians had generally larger budgets, dominating the Core Central Region (CCR). As the number of both Malaysian and Indian buyers increase, their budgets have also grown bigger.  

Mainland Chinese topped all foreign purchases with 28 percent, followed by Malaysians (20 percent), Indonesians (18 percent) and Indians (12 percent).

“Mainland Chinese bought the most private homes in the Outside Central Region (OCR) (31 percent of all foreign purchases in the (OCR) followed by Malaysians (22 percent),” noted Savills.

In the Rest of Central Region (RCR), mainland Chinese were also the top buyers at 27 percent, while Malaysians followed close behind with 20 percent. In the CCR, foreign buying was dominated by Indonesians at 30 percent, while mainland Chinese claimed 20 percent.

The research noted that the leading foreign buyers showed varying investment preferences and purchasing powers over the years. “More particularly, their buying behaviour will likely be impacted by the new property measures implemented on 8 December 2011, although in differing degrees,” it added.

Moving forward, with foreigners taking 43 percent of all prime home sales in 2011, the additional buyers’ stamp duty (ABSD) is expected to hit the luxury segment the hardest. Indonesians will likely take a step back, as they constituted the majority of luxury segment buyers.

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As the effects of the additional buyer’s stamp duty (ABSD) grow in the next few months, buying behaviour among foreign purchasers could change significantly, according to consultants.

In the case of Indonesians, the ABSD and the existing seller's stamp duty may prove too much from an investment perspective. Despite their large budgets, it may repel Indonesian players.

According to Alan Cheong, Head of Research at Savills Singapore, the once-popular smaller format homes may also see lower take-up as their buyer base, mostly short-term investors, wears down.

Mainland Chinese, who comprise the majority of foreign buyers across the smaller home category may shift to alternative investments like retail or industrial assets and strata-titled offices, noted Cheong.

On the other hand, Lee Sze Teck, Senior Manager at DWG Research and Consultancy argues that foreigners will not shift from residential to commercial or industrial options.

“When the market eases, generally residential comes down first, followed by commercial, industrial and retail. Therefore, it is unlikely any sector would be spared a downturn. It is only the magnitude,” said Lee.

In support of this, Nicholas Mak, Executive Director at SLP International's research and consultancy arm, believes that foreigners would not make a major switch due to their lack of familiarity with the product.

Foreigners who own Singapore residential properties would make new purchases with “unparalleled property fundamentals” or offer a price that can offset the ABSD, noted Ong Kah Seng, Director at R'ST Research.

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The Urban Redevelopment Authority (URA) has awarded a residential site at Jervois Road (pictured) to S.L. Development Pte Ltd, after it submitted the highest bid of S$118.9 million in a public tender that closed on 2 February 2012.

Launched for sale on 22 December 2011 under the 2H2011 Government Land Sales (GLS) programme, the 99-year leasehold site has a total area of 8,958.0 sq m with a maximum gross plot ratio of 12,542 sq m and could potentially yield up to 140 housing units. It is located within the prime residential district 10 near Redhill MRT station.

The site “is surrounded by private developments such as Jervois Regency, Jervois Gardens and Jervois Lodge. The High Commission of Malaysia is also close by. Amenities are available at Valley Point Shopping Centre and along River Valley Road,” said Li Hiaw Ho, Executive Director at CBRE Research.

“The future development will be a low-rise development of five storeys, comprising 150 to 200 apartments.”

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En bloc sales have seen a notable increase in the last few weeks, with a total of eight sites up for en bloc sale since January.

However, analysts claimed the figures were still not positive compared to the prospects, with the demand for such sites staying soft. In fact, collective sales on private properties are receding, according to Khaw Boon Wan, Minister for National Development in a blog post.

While this could signify a more stable property market, the emerging trend suggests a different story.

Of the eight en bloc launches so far, five sites were offered last week. The number reflects almost half the en bloc sites offered for sale in Q1 of 2011. A total of 18 sites were put up for collective sale in Q1 2011.

According to analysts, the increase is backed by rushed sales over expectations of a worsening market sentiment later in 2012.

Moving forward, the ambiguous economic outlook may affect buyers’ sentiment.

“More importantly, it’s that they would need to complete the entire process of buying a site, building it and selling out all the units within five years from the time they enter the contract with the sellers,” said Karamjit Singh, Managing Director at Credo Real Estate.

He added that the situation will be more manageable for small en blocs but is “a very tall order” for medium to large en blocs.

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Credo Real Estate’s historical data revealed that the odds against Singapore property prices seem to have been fixed. Following a pattern of several quarters of price moderation, negative residential price corrections were last reflected in 1983, 2000 and 2008.

Notably, this pattern became apparent in 2011’s final quarter.

The residential property index slid from 1.3 percent in Q3 to a scant 0.2 percent in Q4, supporting the view that the existing values are close to their apex.

In addition, the slide in prices overlapped with negative GDP growth and worsening economic conditions that may continue into a recession.

“If a recession occurs this year, it will certainly lead to a correction in the residential market. Even if a recession does not occur this year but economic conditions deteriorate ultimately leading to a recession, the market is also likely to correct,” said Ong Teck Hui, Executive Director and Head of Research and Consultancy at Credo Real Estate.

For a while now, it has been debated when the correction would happen. Analysts opine that property prices would weaken in 2012, backed by rising supply, economic uncertainty and the government’s cooling measures.

On the other hand, if Singaporeans can evade the mild slowdown, a brighter outlook can be expected.

“If economic conditions turn out to be better than expected, we are likely to see a fairly stable market, albeit with uneven performance amongst different market segments and with price adjustments within a narrow range,” noted Ong.

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