In recent years, many Singaporean property investors have been expanding their investment portfolios overseas by investing in properties in countries such as Australia, Thailand and the UK. Singaporeans trust property as an asset class and see it as a symbol of wealth and success, and so this bodes well for property developers targeting Singaporean investors.
One of the primary reasons why Singaporean property investors are looking for overseas properties is to diversify their investment portfolios across different countries and regions.
By diversifying their investments, investors can reduce their risk and exposure to any one market or asset class. Additionally, investing in overseas properties can help investors hedge against currency risk, as they are exposed to different currencies and economies.
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Singaporean property investors also invest in overseas properties to take advantage of currency diversification. The Singapore dollar has been strong against the Sterling Pound and Australian dollar. This means they can maintain a lower cost of keeping a mortgage in a foreign currency.
Australian banks also favor Singapore property investors because of Singapore’s economic and political stability and strong currency. This gives Singaporeans easy access to financing their Australian property purchases.
Australia and the UK are two countries that are particularly attractive to Singaporean property investors due to their stable political and economic climates. In Australia, property prices have been steadily increasing over the past few years, driven by strong demand from both domestic and international buyers.
Similarly, the UK property market has also been performing well, with steady growth in property prices over the past decade. Average UK house prices have increased by 5.5% year on year in February 2023. Even with this, buying UK properties can often turn out cheaper than buying a Singapore property, and can be as much as 75% cheaper.
Another reason Singaporean property investors are looking for overseas properties is the potential for high rental returns. For Australia in 2022, national rents went up by 10.2% because of strong growth in national dwelling rents. Rental yields in Australia have recovered and remained strong, wherein national gross rental yield for all dwellings was at 3.8% in December 2022 according to CoreLogic.
In the UK, there is a large student population renting apartments during their university education. Buying a UK property gives Singaporean the opportunity to earn rental income once their children are done with their university education.
Singaporean property investors are also looking beyond Central London to buy properties. Recent numbers show Singapore investors own £5.8bn worth of property in London. Singaporean investors are also keen on Westminster City, Kensington and Chelsea.
Also, Singaporean property investors also consider transaction costs. Stamp Duties and Taxes are high for property investment in Singapore. The recent Additional Buyer’s Stamp Duty (ABSD) rates have increased, where rates now start from 20% on your second property purchase for Singapore Citizens and up to 60% for foreigners. This drives them to consider other options outside of Singapore properties.
In addition, second mortgages have a lower loan to value ratio, thus requiring a large cash downpayment for Singaporeans. Singapore property prices have been sizzling in recent years and the government has been finding ways to cool it down to discourage speculation and prevent a property bubble.
Wealthy Singaporeans also like to send their children abroad for university studies. Instead of renting, they buy property instead so that they also have a place to stay when they visit their children. Popular cities where Singaporeans send their children to university are London, New York, Los Angeles, Sydney, Perth and Melbourne.
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These cities are attractive second home and holiday home markets for Singaporeans. Australia is also close proximity to Singapore and has seven of the world’s top 100 universities making it a popular destination for overseas studies for Singaporeans.
Investing in overseas properties can also be a way to plan for retirement. By purchasing a second home in a retirement destination, such as a beach resort or a golf course community, investors can plan for their future retirement lifestyle while also potentially earning rental income from their property in the meantime.
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For 2022, Singaporeans ranked UK as their top summer destination in Tripadvisor because of its entertainment options and vibrant culture. This means that they can buy a UK property for their retirement and enjoy it in the meantime as a holiday home. They can also rent it out and earn rental income while they are in Singapore.
Australia is a popular destination for retirement planning, with many Singaporean property investors buying properties in popular retirement locations such as the Gold Coast and Sunshine Coast. Australian cities consistently rank high in surveys on most livable cities. In Knight Frank’s City Wealth Index 2022, out of 100 cities, Sydney ranks 30th for lifestyle while Melbourne ranks 50th for lifestyle.
The Singapore economy has continued to be resilient despite the global slowdown and their stable political climate will ensure continuous investment in the island nation. We expect property investment appetite to remain strong both for local and overseas properties.