Are you seeing less red, Singapore? Property buyers from China have cooled off, and Malaysians again take top spot as foreign buyers. The most obvious reason would be the new stamp duty; but does it go deeper than that? In this article, I speculate on why Chinese buyers are backing out of Singapore. And take off that “Woo Hoo” party hat for ten seconds would you?
1. How Have The Numbers Dropped?
According to the Straits Times, Chinese buyers bought 292 homes in the first quarter of this year. That’s 54% down from fourth quarter of the previous year (640 sales). It’s also the lowest volume of sales to Chinese buyers in over two years.
Amongst foreign buyers in general, the percentage of Chinese fell from 29% to 23%. That’s a pretty fast drop in such a short time. But why?
1. Additional Buyers Stamp Duty
The most obvious cause is the ABSD, which adds a 10% stamp duty for foreign buyers.
The added stamp duty is not a deterrent to wealthy home buyers; they’d pay the 10% duty like I’d indulge in an 80 cent candy bar. But it does deter investors, who are more interested in fast returns than a nice house. And speculatively, I’d say more Chinese buyers are investors rather than home buyers.
Investors purchase property in order to generate rental income, or re-sell at a profit. The 10% is off-putting to them, because it delays their return on investment. In this situation, the ABSD worked perfectly: it filters out the hit-and-run investors who are out to milk us, but retains stayers who’ll invest in Singapore.
Overall, losing hit-and run investors is like popping zits. Unappealing…but not as unappealing as having them around. The sooner we get rid of them, the faster we’ll cool our overheating property market.
2. Economic Slowdown in China
China’s embroiled in a political tussle right now. The new politicians are tired of the “old boys” living off the poor, because damnit, they want to live off the poor too.
In the meantime, China’s economy is swerving like a truck with two drunk drivers grabbing at the wheel; and we know how well they drive. If China’s fifth generation leaders reject Dengist policies (which are liberal with bank reserves and promote liquidity), we’ll see a less economically aggressive China.
Thanks to this uncertainty back home, China’s economic growth has slowed for the first time in many years. And although the money’s still floating around, Chinese investors have become more risk-averse.
3. Shock Effect
Back in 2011, a reason cited for the Chinese exodus was China’s stringent cooling measures. The Chinese government, in an attempt to control price bubbles, started hacking at the property market like Jason Voorhees on crack. Their government intervention was swift and extreme.
Kind of like Singapore’s ABSD.
Singapore’s always had strong protection for foreign investors, and this history amplified the shock. Even though the ABSD is affordable to Chinese investors, some sense a re-enactment of China’s cooling measures. They’re put off not because of the price, but because of the possibilities it implies.
I spoke to a property agent, who wanted to be known only as Darrell:
“I lost one prospective buyer from China. He was afraid maybe Singapore was becoming like China. He already lost money that way and wasn’t willing to go through it again. Another viewer I spoke to said he wouldn’t even consider buying Singapore property now, because the ABSD was like their cooling measures in China.”
(Gee, funny that he was viewing then.)
4. Anti-Chinese Sentiment
With regard to Chinese immigrants, most Singaporeans are about as inviting as an electric chair. Chinese immigrants are perceived as being loud, crass, and self-serving.
This is aggravated by the fact that, since 2011, wealthy Chinese investors have been pricing locals out of their own property market. With Singaporeans running around screaming bloody invasion, the government has been pressured to take steps. All this relates to point 3: Chinese investors have every reason to fear further cooling measures. We’re baying for blood.
It doesn’t help that anger is specifically directed at the Chinese, as opposed to Malaysian or Indian property buyers. This is because of incidents like the Ferrari crash, and the perceived unwillingness of Chinese immigrants to adapt. Many Singaporeans, for example, are frustrated with Chinese immigrants’ refusal to learn English.
If you say “but this has nothing to do with property,” then sorry, but you’re clueless. Property may be about location and money, but it’s also about people. No one wants to live in a place where their neighbours fantasize about setting them on fire.
5. High Cost of Living?
I put a question mark on this one, because it’s an opinion I received but don’t believe. Again according to Darell:
“If you compare Singapore and the more developed parts of China, like Shanghai or Hong Kong, the infrastructure is just as good. The difference is that Singapore has a much higher cost of living. Why will you pay more to stay in Singapore, when opportunities and infrastructure are just as good in Shanghai or Hong Kong?”
Mr. Charlie Sng, a private property investor, also says that:
“In Singapore things are much more expensive than in China. COE, food, education all cost so much, and MAS still strengthen the Singapore dollar. Like that who wants to come and stay here?”
But I don’t believe it.
I hold that high cost of living is irrelevant to Chinese property buyers. The appreciation of their property more than makes up for inflation; and if you can afford a Sentosa Cove bungalow or a penthouse suite, I doubt you’d whine if your coffee costs 40 cents more.
Why do you think Chinese property buyers aren’t biting? Comment and let us know!
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