Ultra-rich are driving a US$24 billion property frenzy in Singapore

A view of a bungalow, which British inventor James Dyson is buying, is seen near the Singapore Botanical Garden in Singapore on July 26, 2019. - British inventor James Dyson is buying the luxury Singapore house with an indoor waterfall that was marketed for $32 million, a report said on July 26, weeks after he snapped up the city-state's priciest penthouse. (Photo by Roslan RAHMAN / AFP)        (Photo credit should read ROSLAN RAHMAN/AFP via Getty Images)
Singapore’s red-hot residential market this year saw S$32.9 billion spent in the first half alone. (PHOTO: ROSLAN RAHMAN/AFP via Getty Images)

By Faris Mokhtar

(Bloomberg) — In an exclusive Singapore neighbourhood shaded with rain trees, a local tech billionaire plunked down US$95 million for a mansion. Near an upscale shopping district, a Taiwanese family with a grocery empire spent US$216 million for all the units in a condominium development.

That’s the kind of money sloshing around Singapore’s red-hot residential market this year. To be exact: S$32.9 billion (US$24 billion) spent in the first half alone — the city’s biggest frenzy in more than a decade and double what was recorded in Manhattan over the same six months.

With inflation on many minds, the ultra-rich are stuffing cash into luxury properties around the globe, and in few places is the trend as apparent as in Singapore. The city’s home prices jumped by a record 4.1% in the first half as tycoons across Asia seek a safe harbour. Some are shifting funds from economies hammered by the pandemic or, in the case of Hong Kong, political turmoil.

The boom in Singapore is reminiscent of 2007, when “well-heeled foreigners were lured by the glamor promised by two upcoming resorts and casinos,” said Nicholas Mak, head of research and consultancy at APAC Realty Ltd. unit ERA. That flurry was tamed by the global financial crisis and property curbs. “The difference now is that there are more newly minted ultra-rich people, especially from China and India.”

Frenetic Buying

When Hong Kong-listed Shun Tak Holdings unveiled its first residential project, Park Nova wasn’t just a showcase of the 54 luxury apartments. It was a display of buyers’ wealth as Rolls-Royce Cullinan and Ferarris descended upon the site, 10 minutes by foot from Singapore’s famous shopping belt Orchard Road.

“I’ve never seen so many luxurious cars at one point,” said Dominic Lee, head of the luxury team at Singapore-based PropNex Realty. “If you drove a BMW that day, you’d feel depressed.”

All three penthouses were snapped up, fetching prices of as much as S$34.4 million. “For rich people, such prices aren’t a concern. If it’s a good buy, they would want it,” Lee said, adding that the buyers were both local and foreign.

Sales of bungalows — the equivalent of mansions and the crème de la crème of housing that can only be purchased by citizens and some permanent residents on a case by case basis — surged by 83% to over S$1.5 billion in the first half compared with a year ago. That’s also 79% higher than the pre-pandemic sales in 2019.

In the city’s prestigious Sentosa Cove, where massive houses on the waterfront boast private berths for yachts, transactions tripled to S$190.7 million in the first half, compared with the same period a year ago, according to data from List Sotheby’s International Realty.

Prices in the neighbourhood — the only area where foreigners are allowed to purchase luxurious bungalows — also jumped 7% last year, mainly driven by interest from China, said Lewis Cha, executive director at Sotheby’s International Realty.

“Some of the buyers decided to move out of their rental apartments for a more permanent home while others decided that Singapore is a safe haven to park their funds,” Cha added.

Buyers’ Confidentiality

Similar to London, there’s another factor luring well-heeled foreign buyers to Singapore: Privacy.

Buyers use trusts to conceal their identities from the public and even the government. For instance, banks can register themselves as the legal owner on behalf of the individuals. It complicates the burden on developers to screen prospective buyers for money laundering risks.

The city-state is reviewing existing laws to further strengthen requirements for developers to guard against money laundering activities in the sale and purchase of uncompleted private properties, a spokesperson of the Urban Redevelopment Authority said in a response to Bloomberg’s query.

Soaring prices have fueled speculation that authorities may impose curbs to cool the market, which last happened in 2018. Those concerns were allayed when the central bank said the property market wasn’t overheated, suggesting the government wouldn’t be making moves anytime soon.

Cooling Measures

Still officials have good reasons to be vigilant. More people are looking to upgrade from public to private units to show they’re moving up the social mobility ladder. If those buyers are priced out, it may become a political test for the ruling People’s Action Party, which is already under scrutiny after suffering its worst parliamentary results last July.

Ravi Menon, managing director of the Monetary Authority of Singapore, said in June that a prolonged divergence between prices and income is unsustainable and undesirable.

“If unresolved, this could lead to questions of a greater inequality gap and what the government is looking to do to reduce this,” said Nydia Ngiow, the Singapore-based senior director at BowerGroupAsia, a strategic policy advisory firm.

Barring any market shocks such as property curbs, however, Singapore’s housing frenzy is set to continue. “The market appears to be going on a Poseidon Adventure, sailing into a tsunami,” said Alan Cheong, executive director of research at Savills Plc. “The tsunami turns out to be the liquidity that is keeping the market afloat.

“Hence, rather than capsizing, the party could continue.”

©2021 Bloomberg L.P.