Straits Times: Mon, Nov 21
FOREIGNERS are making bigger strides into Singapore's property market.
Their share of the private housing pie, excluding that held by permanent residents (PRs), climbed to a high of 18.6 per cent in the third quarter, latest figures from the Monetary Authority of Singapore's Financial Stability Review report show.
This is well above the quarterly average of about 11.7 per cent last year.
The growing presence of foreigners in the market, particularly in buying mass market homes, has raised concerns that they are driving prices ever higher - and out of the reach of some local buyers.
But it is not as if foreigners have unrestricted access. They already face curbs on buying property here and can buy landed homes only in Sentosa Cove. In fact, even PRs are subject to ownership restrictions. They may buy some types of landed housing on the mainland, but only with approval.
The sale of resale Housing Board flats is also restricted to Singaporeans and PRs who meet certain criteria. But the market for private condominiums is open to foreigners, who invest in it on a level playing field with citizens.
Experts say this places Singapore just slightly behind traditionally laissez-faire economies such as Hong Kong.
Associate Professor Sing Tien Foo of the National University of Singapore's department of real estate says Singapore has 'one of the most open and transparent' real estate markets.
Its land scarcity, however, compels it to place restrictions on landed home purchases. He adds that it is only fair that foreigners are also kept out of its subsidised public housing segment, as is the case in other countries.
Markets such as Australia and Thailand are more restrictive, experts say, although none imposes an outright ban on foreign home-buying.
They emphasise that the specific curbs in different countries are calibrated to take into account the political, economic and social situation on the ground and cannot simply be copied in other places.
IN HONG KONG, the market most similar to land-scarce Singapore, the government has adopted a non-intervention policy with no restrictions placed on foreign property investments.
It said in June that any restriction would be a 'major policy change'. As an externally oriented economy, it had to be very careful about the possible consequence of such restrictions, the government emphasised.
This was in response to queries on the need for curbs on foreign buying after prices rocketed more than 70 per cent after early 2009 on record-low mortgage rates and an influx of buyers from other parts of China. Hong Kong has never imposed restrictions on anyone over the purchase or transfer of homes in the past.
The government noted that when considering proposals for curbs, it needed to take into account any impact on the free movement of capital - a key factor for success in the Hong Kong economy.
Hong Kong's status as an international financial centre, its long-term economic development, market response and potential implementation problems also needed to be assessed, it said.
SIMILARLY, Britain does not have restrictions on real estate ownership for overseas investors.
However, foreign investors need to be aware of the various taxes that they may have to pay.
For example, there is stamp duty,
a tax on the property based on the purchase price. Another tax is the council tax levied by the local authorities. This depends on the area in which the house is built. Together, these two taxes - which local buyers also have to bear - can be costly.
FOREIGNERS face no restrictions per se with buying in the US, but non-local buyers can find it more difficult to get a mortgage, says property consultancy Savills Singapore.
Although this is not strictly a restriction in owning US real estate, foreign buyers are also subject to a withholding tax charged on any income and capital gains made on their foreign-owned real estate.
The tax is not charged unless income or proceeds are taken offshore, so it is more of an issue for professional real estate investors than for private buyers.
For example, if the foreign buyer is looking to own US real estate as a second home, or for family members attending college in America, then tax tends to be less of an issue unless significant income and/or capital gains are expected or incurred from the ownership and sale of the property.
BY CONTRAST, Thailand has taken a relatively strict stance on foreign ownership to prevent foreign control of its real estate market.
Foreigners can buy only condominiums, with the total area that may be bought not exceeding 49 per cent of total saleable area in any condo development, according to DTZ Research.
The money used to purchase a condo by a foreigner must also be remitted to Thailand as foreign currency, CBRE noted.
Foreigners are not permitted to own freehold land, so it is rare for them to own landed properties. Exceptions are made for certain industrial estates or for companies with Board of Investment approval.
But a foreigner may register ownership of a 30-year lease with the Land Office, CBRE said. This may be a lease of a condominium, an apartment, a house or land. The Thai Land Code considers 'foreign' ownership to be property ownership by any foreign individual or company.
COMPLAINTS about foreigners, especially Asian buyers, driving up Australian house prices have also led to tough curbs when it comes to overseas purchases.
Foreigners can buy only first-hand property, either under construction or just completed. This should have been approved for sale to overseas buyers by the Foreign Investment Review Board (FIRB).
These homes can then be rented out or retained for the foreign investor's own use. However, the property can be resold only to Australian citizens.
There are no restrictions on the number of dwellings in a new development that may be sold to foreigners, DTZ noted.
Temporary residents have to seek approval from the FIRB to buy real estate in Australia and must sell their property when they leave.
The Australian government says it seeks to ensure that foreign investment in residential real estate lifts the supply of dwellings, brings benefits to the local building industry and its suppliers, and is not speculative in nature.
Source: The Straits Times