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The city-state of Singapore, despite its small size, has emerged as an important economic and cultural hub on the world stage. Ever since Prime Minister Lee Kuan Yew took power in June 1959, the Southeast Asian nation has steadily become a more and more attractive destination for foreign investors. Singapore’s strong, internationally-driven economy, along with its relative lack of developable area, has led to the rise of a very valuable real estate market.
We’ve put together a list of four things you should keep in mind while looking into investing in this international hotspot:
1. An Expensive Place to Live
Singapore consistently places near the top of lists of the world’s most expensive cities to live in. Due to high levels of employment in the financial sector and other lucrative industries, along with the fact that Singapore is nearly 100% urban, people are generally willing to pay extremely large amounts of money for residential and commercial real estate.
According to Numbeo, apartments in Singapore’s city centre have an average value of S$24,357.68 (USD $17,818.16) per a square meter1 as of March 2015. Apartments outside the city centre held an average value of S$12,803.84 (USD $9366.69) per a square meter in the same month.
2. The Market is Cooling
Despite the relatively high value of Singapore’s real estate market, the average value of residential properties has been steadily declining since mid 2014. This is not necessarily the sign of a real estate bubble bursting, however. The cooling of Singapore’s real estate market can largely be attributed to government policies.
In order to curb a rapidly rising cost of living, the government of Singapore imposes a property sales tax of 18% on all foreign investment in new properties. The tax has proven to quell the formerly overwhelming demand many wealthy Chinese, Malaysian, and Indonesian buyers had for real estate in Singapore.
3. Go Commercial?
While residential property prices may still be slipping in Singapore, the value of commercial properties looks to be remaining quite strong. According to Emerging Trends in Real Estate® Asia Pacific 2015, the outlook is looking quite positive for development projects and commercial real estate investment throughout the fiscal year.
Another good sign for the Singaporean commercial property market recently came from a rather unexpected place: Norway. Norway's Government Pension Fund Global (GPFG) is the largest sovereign wealth fund in the world, worth approximately USD $870bn. The fund, fuelled by national oil revenues, has grown to be so valuable due in no small part to the international investments made by the GPFG. On March 22, Karsten Kallevig, the head of the GPFG, told Bloomberg Finance that his organization would be expanding its portfolio to include commercial real estate investments in Singapore and Tokyo. The GPFG has become world-renowned for its successful investments, so potential investors would be wise to pay close attention to its actions.
4. Look for Help
Unless you are extraordinarily wealthy, you would probably be hesitant to invest in a high value real estate market like Singapore’s. With commercial real estate transactions expected to reach a record high of USD $140bn in 2015, it would be intimidating for any independent investor to wade into Singapore’s real estate market. Luckily, help is available.
Many international real estate investment firms, including Jones Lang LaSelle, Pacific Star Group, and Alpha Investment Partners, maintain extensive portfolio’s in Singapore. Researching which firm to work with if you would like to invest in Singaporean real estate could be the key to a successful investment.
Carson Pfahl, a graduate of political science from UBC, is a Vancouver-based curator and freelance writer who contributes frequently to RESAAS Blog.
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by Carson Pfahl