Hello, investors: Singapore property market is your gateway to Asia

Want to know why Singapore has one of the hottest property markets in South East Asia?

Among the SEA5 economies, Singapore’s property market is the most mature and transparent. Being a key financial hub in Asia with well developed physical, legal and financial infrastructure, Singapore is therefore one of the key Asian cities that foreign investors would first look at, according to DTZ's report.

The strong economic growth in 2010 has driven strong demand in Singapore’s commercial sectors and they were categorised as being HOT markets in July 2011, based on the Q2 2011 DTZ Fair Value Index. The rental yields are lower than in other SEA markets, particularly for offices, but investors expect to be compensated by higher capital growth.

However, due to the open nature of the Singapore economy which is highly dependent on trading and financial services activities, the markets can turn quickly if the economic climate and debt problems in Europe and the USA worsen.

Strengths

- Business friendly – ranked most competitive country by IMD in 2010; ranked 1st by World Bank in 2011 for ease of doing business.

- Well-developed legal system and strong intellectual property protection.

- Low tax rates.

- Transparent and well-regulated property market.

- Little restriction governing foreign ownership of properties.

- Gateway to Asia – strategic location for global companies with pan-Asia strategy; springboard for Asian growth companies to go regional or global.

- Central planning authority – government development plans are more easily implemented and better co-ordinated.

- Developed property market.

- Many investment-grade assets.

Challenges

- Limited land – land supply controlled by government.

- Lower yields relative to other SEA markets.

- Many prime assets in the hands of developers and REITs who hold them for long-term investment.

- Higher costs relative to the rest of SEA.

- Small open economy renders it vulnerable to any global economic downturn. Property market is more volatile as well.

Real estate opportunities
Office/Industrial – rents and capital values on the up-cycle, in line with economic growth. Investor focus has shifted away from the peakish residential sector which is subject to government intervention.

Hotels – government’s target is to increase visitor arrivals to 17 million by 2015. More hotels required with more attractions in the pipeline such as the River Safari, Marine Life Park at Resorts World and Gardens by the Bay which will draw more visitors.

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