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Singapore’s Cooling Measures Keep Residential Investors Hot Under the Collar

Will commercial investment continue to support Singapore’s real estate sector in 2015?

This morning I woke up to the news that Singapore has experienced a 10 per cent rise in marriages and a 6 per cent increase in the birth rate over the past year. A quick web search reveals speculative explanations for this impressive increase in fidelity and fecundity. Maybe it’s the baby boomer generation coming of age? Or perhaps it’s due to growth in online dating, which is now being used by more than 51 per cent of Singaporean singletons? Or maybe it’s because of increased arousal in anticipation of the release of the ‘50 Shades of Grey’ movie?

All equally plausible explanations, I’m sure.

Perhaps more reliable contributing factors are the increase in household wealth across all income groups (on average 6.4 per cent from 2013 to 2014) combined with the Government’s measures to increase the supply of publicly developed HDB housing and the introduction of housing schemes to assist young couples with children to setup a home more quickly.

In stark contrast, property investors have been stung by a series of government measures over the last two years, which have been put in place to cool the once-soaring private property market and get house prices under control. Measures – such as ever regular increases in sellers and buyers stamp duty, Loan-to-Value controls and most recently the total debt servicing framework implemented to restrict borrowing capacity – have led to a steady decline in the number of private homes sold and their sale prices. Barclays predicted that these cooling measures will not be reduced until there is a 10 – 15 per cent decrease in prices, suggesting the decline in the private residential property market will continue well into mid-to-late-2015 and perhaps beyond.

The commercial property sector is an entirely different story altogether. In 2014, short-term occupier demand drove office rents up 14 per cent in Singapore, the largest increase seen in Asia, and are projected to continue growing throughout 2015. Retail investors CapitaLand, Metro Holdings and City Developments all experienced substantial profit increases due to mixture of increased retail operations revenue and sales of key retail sites. This trend is also set to continue due to the fact that a considerable number of real estate funds will expire in 2015, leading to a greater number of willing sellers of institutional-grade retail real estate. These details, combined with the shift in foreign investors’ attitude to devote more capital to Asia, mean that increases in commercial real estate investment in Singapore are likely.

The accuracy of these growth forecasts will depend on a variety of external factors – particularly how China responds to its economic slowdown and the effect of impending interest rate hikes in the US. But one forecast can be assured: with the SG50 campaign celebrating Singapore’s 50th year of independence in full swing and persistent nudges from campaigns such as the Mentos national baby making night and the rapidly trending #SG50ShadesOfGrey hashtag, we’re sure to see birth rate growth continue in Singapore through 2015!

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