Real estate in Singapore is unique and differs from many countries due to several distinct characteristics. Understand the property scene give us the opportunities to tap on to its key attributes for possible investment.
Limited Land Supply
Singapore is a small city-state with a land area of about 728.6 square kilometers, and its land constraints are a significant factor in its real estate market. The scarcity of land leads to high property prices and innovative approaches to maximize land use, such as building upwards and developing underground spaces. Over the years the country has increase it with land reclamation. In fact these reclaimed land has created many iconic building and changing major landscape. These includes Gardens by the Bay, the Marina Bay Sands, Marina Bay Financial Centre, Asia Square, The Sail @ Marina Bay and Marina One integrated mixed-use developments.
Government Control and Planning
The Singapore government plays a crucial role in the real estate market through the Housing Development Board (HDB) and the Urban Redevelopment Authority (URA). About 80% of the resident population lives in HDB flats, which are public housing managed by the government. The government’s involvement ensures a high level of planning, from the layout of new towns to the allocation of space for various uses. URA has its Master Plan for the public view to encourage interaction of the planning of land. Masterplan is updated every 5 years as and when the country vision and goal changes.
The revision of the Master Plan allows the government to keep pace with changing needs and to plan for future developments. It provides a comprehensive guide on how land is used and developed, including details about the density of areas, the types of buildings allowed, and the allocation of land for various purposes such as housing, commerce, industry, and transportation.
High Rate of Home Ownership
Despite high property prices, Singapore has one of the highest home ownership rates in the world, at around 90%. This is largely due to the government’s policies aimed at promoting home ownership, such as providing grants and favorable financing options for HDB flats. These includes the use of The Central Provident Fund (CPF) plays a crucial role in financing home purchases. Singaporeans can use funds accumulated in their CPF Ordinary Accounts to pay for their HDB flats. Together with housing grants for public housing, property is an asset class that highly valued.
Use of Leasehold Properties
Much of the land in Singapore is leasehold, with the majority of residential properties sold on 99-year leases. This contrasts with many other countries where freehold properties (where the owner has perpetual ownership of the land and the building) are more common.
The leasehold system allows the government to retain control over land use and redevelopment, enabling it to respond to changing demographic, economic, and environmental conditions. This central control facilitates strategic urban planning and redevelopment, ensuring that land use remains optimally aligned with the nation’s long-term needs.
Foreign Ownership Restrictions
Singapore imposes certain restrictions on foreign ownership of property. For example, foreigners are generally not allowed to purchase landed residential properties unless they obtain special approval. However, they can buy condominiums without the same level of restriction.
Foreigners buying any residential property in Singapore are required to pay an Additional Buyer’s Stamp Duty (ABSD) on top of the regular stamp duty. ABSD for foreigners is 60% of the purchase price or market value of the property, whichever is higher. This is significantly higher than the rates for Singapore citizens and permanent residents, serving as a disincentive for foreign investment in residential real estate to prevent excessive price inflation.
Real Estate as an Investment
Property in Singapore is often seen as a safe investment due to the stable political environment, strong rule of law, and consistent economic growth. The government’s consistent policies and strong governance minimize risks associated with political upheaval or policy shifts. With the legal framework that is robust and transparent, property rights are strictly upheld and disputes are fairly resolved. This builds investor confidence, as they can be assured that their investments are protected by law. And with a pro-business environment, extensive trade networks, and strategic economic initiatives that attract multinational corporations and high net worth individuals, bolstering a high demand for Singapore real estate.
This attracts both local and international investors, making the real estate market highly competitive.
Conclusion
These factors combined create a unique real estate environment in Singapore that differs markedly from other countries, especially in terms of government involvement, land use efficiency, and market dynamics.
