Investing in Singapore Real Estate as a Foreigner
TLDR The blog post discusses the rules and regulations for foreign investors looking to purchase real estate in Singapore. It...
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TLDR
Over the past two decades in Singapore, the trend of HDB residents upgrading to landed properties has fluctuated. While HDB upgraders once made up a significant portion of landed home buyers, the percentage has decreased over time. Terrace houses are the most popular choice among HDB upgraders due to affordability and availability. The price gap between public housing and landed properties continues to widen, making it challenging for individuals to transition to landed homes. Future trends suggest a further increase in this price disparity, driven by limited supply of landed properties and government efforts to maintain public housing affordability. The decision to buy or sell property should be made considering individual circumstances, as the market evolves with various factors at play.
In Singapore, where land is a rarity, landed homes are the cream of the crop in the housing sector. Even with sky-high prices, it’s not uncommon to find folk who’ve climbed up the property ladder from public housing making a beeline for these.
Look at the decade between 2004 and 2013. Nearly one-quarter of all landed properties changing hands during that time were snapped up by buyers stepping up from the public housing space. This trend touched its highest mark in 2009 when almost 30 percent of landed homes were bought by these upgraders.
Fast forward to 2014, and HDB flat owners took home nearly 25 percent of the landed homes sold that year. This was the second peak in this trend over two decades.
You know what’s interesting? Since 2014, those upgrading from HDB apartments to landed properties started making up a smaller piece of the pie in the landed market. By the time we hit 2023, they were only about 15.3% of the whole deal.
From 2004 to 2013, nearly a quarter of all landed houses were purchased by folks who had an HDB address on record. In fact, in 2009, about 30% of these types of homes were bought by people upgrading from HDB. However, by 2023, this figure had dwindled to just over 15%.
Investing in a private detached house is often seen as the pinnacle of progression for public housing (HDB) residents. Nevertheless, this opportunity is becoming increasingly elusive due to various factors.
Past trends indicate that buyers were more inclined to venture into the detached housing market when there was a significant drop in prices. The highest number of HDB residents transitioning to detached homes was recorded in 2009. This shift was triggered by the drastic price drop following the 2008 global financial meltdown. During this period, the detached housing price index shrunk by 19.1% from mid-2008 to mid-2009.
In 2014, the detached residential price index again saw a contraction of 5.4% after the introduction of strict cooling measures. As a result of this, there was a slight increase in the percentage of detached homes bought by HDB upgraders – it rose from 22.6% in 2013 to 24.5% in the subsequent year.
Over a span of two decades from 2003 to 2023, it’s clear as crystal that the cost of private homes and HDB resale flats shot up. We’re looking at a steep rise of 143.1% and 140.2% respectively. But landed homes? They took a bigger leap, a whopping 180.6%.
Now, let’s talk about another factor that’s aggravating the situation – the wide price gap between public housing and landed properties. Take 2013 for example. Your typical five-room HDB resale flat, the largest kind built in the last 20 years, would set you back S$537,000. Compare that with a terrace house, the smallest type of landed property, priced at a hefty S$2.68 million. That’s five times more expensive!
It hasn’t gotten any better. Since then, private houses have been racing ahead in terms of price increase, making it tougher for folks to climb the property ladder.
Let’s break it down further. Between 2013 and 2023, both landed and non-landed private homes saw their prices rise by roughly 31.7% and 31.6% respectively, according to official stats. HDB resale flats? Not so much. Their increase was a more modest 23.7%.
During the same period, the median price for terrace houses ballooned by 34.3% to S$3.6 million, while five-room resale flats trailed behind with a 21% hike to S$650,000. This means your average terrace house is now 5.54 times pricier than a five-room flat.
And the absolute price difference? It’s grown too, from S$2.14 million in 2013 to S$2.95 million in 2023. That’s a rise of 37.7%, way more than the 21% uptick in the cost of five-room flats over the last decade.
Unveiling the Landed Homes Market Choices of HDB Upgraders
In the world of landed homes, HDB upgraders tend to gravitate towards terrace houses. Why? Well, they’re pretty easy on the pocket compared to their counterparts – the swanky semi-detached and detached homes, also known as bungalows.
Terrace houses aren’t just the budget-friendly option; they’re also the most plentiful variety of landed homes you’ll find in Singapore. To put it in perspective, over the past ten years, terrace houses have been hogging the limelight, accounting for a whopping 59% of all landed home transactions. Bungalows and semi-detached homes had to settle for a slice of the pie, making up 12.3% and 28.7% of sales, respectively.
Fast forward to 2023, and HDB dwellers were still smitten with terrace houses. Over 71% of landed homes bought by them were terrace houses. Semi-detached houses held some charm too, accounting for 23.2% of purchases, while bungalows were the chosen pick for just 5.6%.
Interestingly, HDB upgraders in 2023 showed a clear preference for suburban regions in the Outside Central Region, with nearly eight out of every ten houses bought located in these areas. It’s quite likely that these buyers felt a strong pull towards the HDB estates where they resided or had close-knit family and social connections.
Sure enough, there’s a chunk of folks upgrading their HDBs who are pretty flush with cash – around 9.9% of them are buying in the Core Central Region and about 10.7% in the Rest of Central Region.
Looking down the line, we can expect the price difference between public and private landed properties to stretch even more. This will be mainly due to government strategies aimed at keeping public housing prices reasonable, which will likely put a brake on the speed of HDB resale flats’ price increase.
At the same time, the government is pushing out more HDB flats – somewhere between 18,000 and 23,000 each year. However, when you compare that to the meager average of 300 new landed houses completed annually over the last ten years, it’s clear that the supply is limited. This scarcity of landed homes is just going to make the price gap balloon even further.
Should You Buy, Sell or Wait?
If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?
It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.
I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.
I can help you by:
- Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
- Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.
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