THE EDGE. 25TH MAY: Buying a property in Singapore now comes with a hefty price tag for foreign buyers and those buying a second property. On April 27, the Singapore government announced an increase in Additional Buyer’s Stamp Duty (ABSD) to 60% for foreign buyers and 20% for Singaporeans buying a second home.
This is the third round of cooling measures for Singapore, in its continuous efforts to achieve a sustainable property market.
For background, the Singapore government announced two rounds of cooling measures — in December 2021 and September 2022 — for the purpose of moderating demand and promoting prudent borrowing. The measures have had a moderating effect.
The first and second rounds had involved an increase in ABSD rates, a tightening of the Total Debt Servicing Ratio (TDSR) threshold and reduction in the loan-to-value (LTV) limit for Housing & Development Board (HDB) housing loans — the latter, from 90% to 85% in the first round and then to 80% in the second round.
Singapore saw renewed interest from local and foreign investors amid resilient demand from Singaporeans purchasing homes for owner-occupation in the first quarter of this year, according to a joint statement by the Ministry of Finance, Ministry of National Development and Monetary Authority of Singapore.
However, will the steep hikes in the ABSD rates deter foreign buyers from purchasing a property in Singapore? But the bigger question is, will Malaysia’s property market see a spillover effect?
KGV International Property Consultants (Johor Baru) Sdn Bhd executive director Samuel Tan says foreign buyers have been looking at nearby cities in Malaysia as well as those in neighbouring countries, including Bangkok, Batam, Bintan, Bali, Melaka, Kuala Lumpur, Penang and Johor Baru owing to the hike.
“Singapore is getting more expensive to stay and invest in. Some foreign buyers will be looking at nearby cities and Johor Baru, being the nearest, will definitely benefit,” he tells City & Country.
CBRE | WTW director Jonathan Lo concurs. “We noticed that a few projects near the Causeway have been attracting foreign buyers since the reopening of international borders, which proves that Johor is already attracting foreign investments. This will be further enhanced by the spillover effect from the rise in the ABSD rates,” he says. The projects include Coronation Square and Space Residency. The Coronade Residences, the 551-unit residential component of the 9.58-acre integrated development Coronation Square, was 40% taken up as at April. Space Residency, meanwhile, has about 1,000 serviced apartment units, of which 95% have been sold.
Johor Baru’s attractiveness
Johor Baru’s main advantage over the other aforementioned cities is its close proximity and easy accessibility to the island state. Furthermore, its strength lies in its infrastructure, healthcare, education and retail offerings as well as rich culture, says Tan.
“Johor Baru’s infrastructures — including roads, the provision of power and water, amenities such as healthcare and education as well as retail, entertainment, leisure and F&B offerings — are in many ways more advanced and well planned compared to other cities.
“There are many inherent advantages that many take for granted like our legal system, languages, food, rich culture and heritage. We are in many ways similar and comparable to Singapore,” he adds.
On top of that, the lower property ownership and living costs in Johor are pull factors in attracting buyers from Singapore and other countries to purchase units in the state, says Lo.
“Thus, Johor Baru would be the natural choice for foreigners who are looking for an accommodation that costs less and a better quality of life,” says Tan.
Tackling Johor’s oversupply issues
Property overhang remains a problem in Johor Baru. According to the National Property Information Centre (Napic), Johor had the highest number and value of unsold properties of 5,258 units worth RM4.33 billion in 2022.
Singapore’s cooling measures present an opportunity for Johor Baru to take advantage of the situation and improve the performance of its residential property market.
Tan shares that the performance of a residential property market depends on the whole economic ecosystem, encompassing commercial, industrial, retail, hospitality, leisure and entertainment components.
The government should come up with policies that holistically attract foreign start-ups and companies to set up their head office, regional representative office, home office and manufacturing plant, among others, in Johor or Malaysia as a whole, he adds.
“Our residential market will only be vibrant and sustainable if there are foreigners who consistently invest and work in, as well as visit our country,” Tan stresses. He says any incentives given and efforts made to promote the country must be consistent and “we cannot afford to be in an ‘on-off’ mode in our effort to attract foreign investments”.
One of the measures that the government could explore is the revival of the Malaysia My Second Home (MM2H) programme, by making it easier for foreigners who wish to retire in the country to meet the criteria.
Besides that, the oversupply issue — caused by a mismatch between demand and supply in the market — could be dealt with by lowering the threshold for foreign ownership, along with providing the correct product mix at attractive locations, says Lo.
“We noticed that projects which offer the right product mix in terms of price, property type and location as per market demand have been receiving good response from the market,” he adds.
Several other measures Tan suggests are increasing the quota for foreigners within a residential scheme for a period of time, and lowering the Real Property Gains Tax for foreigners for certain residential properties.
Traffic congestion
As much as Johor Baru enjoys good connectivity to Singapore via the Johor-Singapore Causeway and Malaysia-Singapore Second Link, traffic congestion remains a nightmare for those who have to cross the borders every day.
Those who live in Johor Baru and work or study in Singapore, and vice versa, have to travel in the early hours to avoid the traffic snarls, and “many foreigners are put off by the bottlenecks at the causeways”, says Tan.
Yet, despite the congestion, the lower cost of living and property ownership in Johor are still pull factors for buyers from Singapore and other countries, says Lo.
“Some projects located in the Johor Baru city centre and around the city fringes that enjoy good connectivity to Singapore have been receiving good response from Singaporeans and foreign buyers,” he reveals.
Thus, the links between the countries need to be improved and the immigration process at checkpoints streamlined for a seamless travelling experience. In fact, the Malaysia and Singapore governments had in January signed a memorandum of understanding on cybersecurity, which aims to enhance cross-border data protection and smooth the immigration process between the two countries.
“With these upcoming implementation, the congestion issue could be resolved, easing the burden of those who have to travel across the border on a daily basis,” says Lo.
Catalysts for Johor Baru
Upcoming infrastructure projects such as the Rapid Transit System (RTS) Link, which will connect Johor Baru and Woodlands in Singapore, will serve as catalysts for the state to enhance and facilitate the movements between Malaysia and Singapore. The multibillion-ringgit RTS Link will, in turn, further increase the attractiveness of the state and encourage foreign buyers to purchase a property in Johor Baru.
“Owing to the accessibility enhancement, more people may choose to stay in Johor Baru while working in Singapore. Foreigners could also easily access services such as education and medical in Singapore while staying in Johor Baru due to the shorter travelling time,” Lo explains.
Tan concurs that the RTS Link will shorten the travelling time, and opines that there should be more linkages to facilitate the traffic between the two countries, such as the high-profile Kuala Lumpur-Singapore high-speed rail project. Nevertheless, it has been in an on-off mode for the past two years.
Other possible linkages to explore would be ferries and a third bridge between the two existing causeways, he adds.