A truly savvy Singapore property investor doesn’t just keep track of what’s happening in the Lion City—he also keeps tabs on what’s going on in the rest of the world. What happens elsewhere could either affect our local markets, or open alternative opportunities for wealth growth and asset investment beyond our shores.
In this piece, we take a look at some of the global property trends in recent times that are affecting, or could affect, our local market activity, and what opportunities they could potentially offer to an investor with a good eye.
Global increase in rental demand could also affect the Singapore market
With property home ownership rates in Singapore being at a high of 91%, we are a fortunate bunch. Although in countries around the world most people still prefer to own homes, renting is on the uptrend.
According to Rentcafe Blog, out of 21 countries of 30 countries including the US, Canada, Russia, Japan, Israel, Australia, some European countries, there is an increasing prevalence of people renting homes, with UK’s population rent volume increasing by 22% in only 5 years.
In many other parts of the world, the proportion of people renting rather than owning a house has been on the rise too. One example would be Germany, as it is one of the countries with the lowest home ownership rates as compared to other countries worldwide. In many countries, young people now are struggling to afford the same homes their parents could afford at their age, hence increasing the trend of renting houses among their demographic.
What does this trend mean for Singapore’s rental market? Has it already begun to affect us?
We would say yes. For one, foreigners already make up a significant proportion of Singapore’s private property—as much as 24% of private housing according to our report. This choice to rent is in large part due to our property landscape that includes a heavy ABSD tax on foreigners.
Indeed, according to a Straits Times report, in May 2020 the total private non-landed rental volume was 2881 while the HDB rental volume for the same period was 1,147, of which the bulk would be foreigners as there is a very high percentage of home ownership among locals.
Besides foreigners, we are also seeing an increase in Singaporean youngsters renting property. Privacy and the desire for liberation are some reasons cited by youngsters moving out. So if this trend swells, property owners can also expand their pie of tenants to include young Singaporeans.
Rise in overseas property investments in foreign markets
In an increasingly connected world, property investors have taken to looking beyond their own shores if their local market doesn’t afford enough value, or if foreign markets are more enticing. Singapore is both the participant and the recipient of this trend.
Faced with sky-high local property prices, people in places like Hong Kong and Singapore have turned to overseas markets to seek better opportunities for investment. CBRE data showed that London was the choice destination with 26% of Asian outbound capital in the first half of 2018 with both Singaporean and Hong Kong investors vying for property in the UK due to British currency depreciating with the departure from the European Union. In fact, CBRE showed Singapore as the largest source of Asia Pacific outbound investment in the first half of 2018, with US$9.06 billion of capital deployed.
In recent times, Singapore real estate investment trusts (REITs) and developers have been sweeping property off shelves in Australia, Southeast Asia and Europe, so if you’re looking to invest overseas, you may want to consult your financial planner on investment in overseas REITs opportunities.
Conversely, foreign capital inflow could also boost the Singapore property market and provide opportunities for local property owners to sell to foreigners.
Mainland Chinese for one are known to splurge on foreign property due to value for money foreign property buys. They buy because foreign property prices drop, or because they want to park their money elsewhere due to yuan depreciation, or because they see a value in investing in a country where there is a large Chinese community or good education facilities.
Social trends favour small households, pulling up demand for properties
Globally, we’re seeing more delays in marriage, delays in having children and smaller families with fewer children. This shift can result in a change in buying behaviour.
In the US, a report by the U.S. Census Bureau found that less than 60% of people aged 25 to 34 live with a spouse, versus 80% in 1967. The average age of marriage in the U.S. is now 27.8 for women and 29.8 for men, the highest since 1890. According to a Gallup poll done in the US, more millennials currently live in multi-adult households than is true for other generations, with data suggesting that these multi-adult households consist primarily of single millennials living collectively.
This trend of marrying late and having smaller families is reported to be the same in Singapore. Data from Singstat revealed the number of households with an unmarried person grew 69% to 185,400 as compared to a decade ago. So if the trend is to have smaller families, property developers and investors may want to take a closer look at housing targeted at singles and singles sharing a property, versus the traditional family household of an actual family living together.
In addition, the trend of smaller households can also lead to a higher demand for housing since it is no longer the norm to have extended families living together. This demographic trend could present potential opportunities in the long term.
Rise of sustainable homes see more eco-friendly developments being built
According to Nielsen research, 73% of millennials (they attribute the term to those born between 1977 and 1995) are more willing to foot extra for sustainable products. Typically known as “green homes”, these eco-friendly developments would use environmentally-friendly materials and renewable energy over traditional means. Developments with amenities that promote professionals to work remotely for example can be another trend that reduces carbon footprint and so another mode of eco- friendly housing that may become popular.
Additionally, environmental concerns affect not just how and where developers build, but can potentially go as far as the financial aspects of a property. A recent development in world property finance is the introduction of green mortgages in Europe, as an alternative to a regular loan.
Green mortgages are financial products that link the cost of borrowing directly to the energy performance of your property. The money saved by the borrower on an energy efficient home should enable them to be better paymasters. Interest rates are also lower because of the lower risk of default. According to a study by the non-profit Institute for Market Transformation (IMT), owners of energy efficient homes are 32% less likely to default on their mortgage payments.
While this type of mortgage hasn’t been introduced in Singapore yet, but with growing awareness, interest and action from both public and private sectors involved in environmental protection, it may one day become a viable option, with attendant opportunities for savings for potential buyers and investors.
Keeping Abreast of Global Trends
In a globalised and connected economy like Singapore’s, every change in global and foreign market dynamics can have an impact on the way we buy and sell, and even who we buy and sell to. While we have covered a few interesting global trends here, there are countless other winds of change that may present opportunities to investors in Singapore. A well-informed and nimble investor can find and take advantage of these as they arise. Opportunity favours those who are most informed, so stay tuned to the latest property investment news from our PropertyGuru guides.
As always, knowledge is power—and profit!
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