Singapore property measures emphasise real estate selection
In a surprising move last week, Singapore increased the tax rate on residential properties like Normanton Park Floor Plan and Normanton Park Balance unite charts which are purchases by non-Singaporeans from 30% to 60%, and from 15% to 25% for acquisitions made via a company or trust. Stamp duties for citizens and permanent residents purchasing a second or subsequent house have also increased by a little amount.
Two months after the last wave of cooling measures failed to moderate house prices, a new set of regulations were enacted with the intention of discouraging the flow of “hot money” into the domestic property market. The first quarter of 2023 saw private property prices in Singapore increase by 3.3% year over year, marking the 12th consecutive quarter of price growth according to official figures released last Friday.
However, in recent years inflation has been one of the main concerns of global investors, making long-term investments in “real assets” like real estate more appealing. Opportunity persists in some types of real estate, we believe.
The home market is the primary target of the newest wave of property cooling measures, the third such round in the last 19 months. As the number of international purchasers in Singapore has increased, mainly from China, so have the city’s home values. If housing prices keep rising faster than incomes and other necessities, we may have to take more actions to calm the market.
Our positive outlook on Singapore REITs is unaffected by these actions. After trailing the market in 2022, we predict that real estate investment trusts (REITs) are about to surge ahead thanks to favorable economic winds. Retail rents have leveled out following a multi-year drop, while office rents have increased by 8% from their COVID-19 lows. We believe that increasing rents might act as a buffer against inflation and that REITs’ lack of exposure to the residential sector will protect them from macroprudential risks associated with the property market.
We like high-quality Singapore REITs that can continue to distribute even as borrowing costs rise, and we continue to be wary of Singapore REITs whose distributions can’t withstand changes in interest rates or asset prices.
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