Will Wealthy Chinese Fleeing China Increase The Property Price In Singapore In The Future?

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Jan 13, 2023

Will Wealthy Chinese Fleeing China Increase The Property Price In Singapore In The Future?

Opinion Post: This article is based on the writer's opinion and information included is based on research and various online websites.

With Chinese economic growth slowing down and its stock market in decline, Chinese investors have sought new financial havens elsewhere — including Singapore. Whatever wealth these wealthy Chinese bring with them could help to drive up property prices across the city-state. But what does this mean for those of you who live or invest in Singapore’s property?

Many people are currently asking if there will be an impact on the local housing market. Will rich Chinese investors drive up prices?

Chinese Buyer And The Property Market in Singapore

According to the Urban Development Authority, the average monthly sales price for private residential properties rose by 5% during the third and fourth quarters of 2021 alone. Prices for private residential property rose by 10.6 percent in the whole of 2021, compared with an annual rise of just 2.2 percent in 2020.

Singapore's property market has shown far greater resilience than most other markets around the globe despite worries about slower global economic activity. One reason for this resilience is an influx of Chinese buyers, who account for the biggest share of non-resident home buyers in Singapore.

Buyers from mainland China purchased 42% of private condos sold to overseas buyers in Singapore in the first eight months of 2022, according to a report published in October by property consultant OrangeTee & Tie.

They also constitute the biggest group of investors buying luxury properties in prime districts this year, scooping up almost 20% of apartments with price tags exceeding S$5 million ($3.5 million) each, it added.

To foreign investors in Singapore property market, the city-state enjoys political stability and freedom from natural disasters paired with attractive tax regulations for foreign inhabitants that make it an especially desirable place to invest in. Its real estate is seen as a sound long term asset for many overseas investors to make the hefty tax (Additional Buyer Stamp Duty) on foreigners buying property worthwhile.

Why Would They Flee China? - Xi Jinping's 'Common Prosperity' Policy

There are two main reasons why wealthy Chinese citizens are choosing to leave China and move to Singapore. Firstly, the Chinese government has implemented policies aimed at reducing inequality and poverty. These measures include raising minimum wages, increasing social welfare spending, and providing free healthcare and education.

While these policies may benefit many citizens in the long-term, they may also lead to economic instability in the short-term.

The policy includes measures such as raising minimum wages and increasing social welfare spending, which can lead to inflation and put pressure on companies to raise prices to maintain profitability.

This may lead to a decrease in profits for companies, which can negatively impact wealthy business owners and investors.

Additionally, the policy may lead to a decrease in foreign investment, which can negatively impact wealthy individuals who rely on foreign investment for their businesses or investments.

Furthermore, providing free healthcare and education can put a strain on government finances, which can lead to budget deficits and higher taxes. This may lead to an increase in taxes for wealthy individuals, which can negatively impact their financial well-being.

Additionally, the Chinese economy has been facing challenges in recent months, including a sharp decline in stock markets. As a result, some wealthy Chinese citizens may be seeking to diversify their investments and protect their wealth by investing overseas, including in countries like Singapore, which has stability, low taxes, and a well-developed financial infrastructure.

Singapore is one of the world's most attractive countries for wealth management due to its stability, low taxes and well-developed financial infrastructure. As a result, many wealthy Chinese are looking into setting up family offices here.

The city state offers tax breaks to foreign investors, including exemptions on capital gains, dividends and corporate income tax. It also provides generous incentives to encourage foreigners to set up companies here.

But while the city state welcomes foreign investors, it does not allow dual citizenship.

Singapore is becoming a popular destination for wealthy Chinese investors.

Real Estate Tax for Foreigners in Singapore

A new tax levy was introduced in December, which adds additional stamp duty for many potential homebuyers.

To cool off its overheated real estate market, the government of Singapore introduced a new tax alongside several other cooling measures.

The new tax rate adds between 5% and 15%, depending on whether you're buying a house outside of your local city limits or if you're purchasing a second residence (vacay) during the year. It goes into effect for purchases made on or after December 16, 2021.

Foreign buyers who buy properties in Singapore will be required to pay an additional 30 percent stamp duty on top of their property purchases.

Moreover, second-home buyers will also see increases. For permanent residents, the current rate is 25%, up 10% from 15%. In addition, a 30% tax is charged on third and subsequent homes, doubling the 15% rate charged before the changes took place.

Chinese buy properties in Australia, and abandon it, but prices remain high. Will it happen to Singapore too?

There’s a real estate bubble in Australia. Chinese investors, a huge purchaser of homes in recent years, overwhelmingly bought only to hold and not live in them. In other words, they’re speculators. As their money leaves the country, prices are expected to fall.

Australia's real estate prices have also indirectly received a boost from Chinese investment and purchases. In the year ending 31 October 2015, there were 12,800 parcels of land sold across Australia to Chinese investors by Australian agents. This is double the figure for FY14. Likewise, the amount of sales in which buyers are seeking work or residency opportunities in Australia has also risen – going from 19% of sales in FY14 to 29% over the January 2016 year-to-date period.

It is possible that the phenomenon of wealthy Chinese citizens buying properties in Singapore and then leaving them vacant could occur in Singapore, as it has in other countries like Australia. However, it is important to note that the real estate market in Singapore is different from that in Australia and other countries, and a variety of factors can influence property prices.

For one, the housing market in Singapore is much more strictly regulated than that of Australia, placing limits on foreign ownership for non-citizens. This means that Chinese buyers here would have to factor in additional legal, tax costs and restrictions when considering purchasing property here. Furthermore, with a more established economy and stable job market, Singapore can offer a more secure investment than Australia. As such, it is unlikely that Chinese investors would take the risk of investing in properties here, only to abandon them later.

Additionally, it is important to note that vacant properties can have negative effects on the housing market and local communities. They can lead to a decrease in property values, and can also contribute to urban blight and disinvestment. The government and real estate industry may take steps to address this issue, such as implementing regulations on vacant properties or incentivizing owners to rent or sell their properties.

What Implication Does This Mean For Singaporeans?

The influx of Chinese citizens purchasing homes in Singapore may add to the upward pressure on house prices especially in the private property sector. However, it is uncertain whether this will benefit Singaporean citizens as well.

The concept of trickle-down economics, which suggests that economic growth and prosperity will eventually benefit all members of society, has been widely criticized by economists. While some high-wealth Chinese migrants may establish businesses or family offices in Singapore, there is no guarantee that this will have a significant impact on Singaporean citizens. It is likely, however, that the growing presence of high-wealth Chinese individuals in Singapore will strengthen the economic ties between the two nations.

In conclusion, the influx of wealthy Chinese citizens leaving China to invest in overseas markets, particularly in Singapore, has led to increased demand for real estate in the city-state.

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