Are Foreigners Contributing to the Rise Singapore Property Prices?
With the expansion of PRs and non-residents far surpassing that of citizens during the past five years, there has been a growing response among Singaporeans that foreigners are crowding out the market and pushing up property prices.
From 2004 to 2009, the amount of PRs and non-residents grew at a compounded yearly growth rate of 8.4% and 10.7% respectively, versus 0.9% for voters (and 3.7% for the total population). Over this period have a grand total of 677,000 foreigners (PRs and non-residents) were added to the population versus 172,000 voters. In other words, foreigners accounted for approximately 80% of the increase in Singapore's population over the past five years. Near the end of June 2010, Singapore's total population hit 5.08 million with foreigners accounting for 36% "there is definitely more than one foreigner for each two Singaporeans.
A growing population actually adds to home demand, and in this example the increase has usually been from the augmenting number of foreigners. This increased home demand comes in the shape of renters and customers. More buyers would push up property prices immediately, while more renters would do so indirectly as higher hires would improve rental yields and lure investors to go into the market.
An alternative way to have a look at this issue is by the rising proportion of foreigners purchasing non-public homes here. Foreigners (including PRs) accounted for 15.5% of total non-public home purchases in the first quarter of 2009, and which has risen to 23.7% in quarter two of 2010, so foreigners are playing a larger role in the private property market.
It is not only the foreigners
But foreigners aren't the one and only factor behind property prices. The present environment of short interest (and mortgage) rates makes it easier for buyers to leverage up and pay elevated prices. As an example, a household earning S$8,000 each month can afford to borrow $811,312 when mortgage rates are at 1.5% versus $586,491 when they're at 4% (presuming a 30 year loan and 35% of earnings spent servicing the mortgage).
Also, incomes are rising and Singapore residents are becoming wealthier. The IRAS recently reported that the amount of personal earnings taxes received from individual tax payers rose from S$5.4 bill to S$6.1 bill in economic year 2009/2010, a 13% increase. With GDP growth anticipated to be 15% in 2010, incomes and wealth are likely to increase also.
So it's not simply the increasing population (mainly from foreigners), but also inexpensive money (rates are the cost of money) and rising incomes which are supporting property prices. An extra factor may be the growing interest from foreign financiers who are drawn to Singapore's chic buzz and strong currency.
These elements have contributed to an optimistic property market "prices rose 11% in the first part of 2010, and price levels have surpassed the historic peak reached in the 2nd quarter of 1996.
In response, the government expounded new dealings on August 30 trying to cut the amount of speculative and investment demand in the home market. Particularly, the measures emphasise the role of HDB lofts as a system to meet resident end user demand and not investor demand. Also, the intended increase in supply of HDB flats (22,000 Built to Order, 8,000 Executive Condo and 7,000 Design, Build and Sell Scheme lofts) are meant to moderate the fast price rises practiced in the past one or two years.
Going further, despite tighter control of population expansion and foreign employee inflow, Singapore's taken as a whole population is still projected to hit 6 million by 2020. For 2010, thanks to the successful economy, around 80,000 new foreign workers will be required. This increasing population (typically from "importing" foreigners) and rising earnings will keep on supporting end user demand in the long term.
Hope you enjoyed reading this Singapore property market article!
Propwise.sg, a top Singapore property blog, is devoted to helping you understand the property market and make better decisions. Visit us to read more Singapore property market articles.
Related posts:
- UK petrol prices rise, as Europe prices fall
- Methods to get tax deduction when submitting tax return inside Singapore
- Working In Singapore With Employment Pass And S Pass Working Visas
- Gain Information About The Australian Property Market
- House Hunting In The Australian Property Market
- Registering A Private Limited Company In Singapore
- Working Permits Granted To Immigrants Who Are Employed In Singapore
- A Brief Profile Of Singapore’s Goods And Services Taxation Policies
- Falling Home Prices Have Little Impact On House Taxes
- Find Quality Accounting Services In Singapore