Despite the many headwinds that the Singapore property market has faced, such as the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis, property remains a great investment for those seeking to accumulate wealth with the least risk possible.
The following chart shows the ups-and-downs of the Singapore property market.
We can see that the 1997 Asian Financial Crisis caused quite a bit of panic in the market when prices feel 50% in the space of 2 years.
The SARS Crisis resulted in a protracted downturn over 4 to 5 years, with prices falling 40% before dipping in 2004.
The Global Financial Crisis in 2008 resulted in a brief fall of 30% over the space of 1 year but prices quickly recovered thereafter.
Despite the ups-and-downs of the price index, why does Singapore remain an attractive investment destination? The following are some reasons
Transparent and secure legal system
Few capital controls on money coming in and going out of the country
As an overseas investor, you want to be able to make sure you can deposit money into the country when you buy, and take it out to remit it to your home country upon a sale. Singapore’s banking system is highly advanced compared to neighbouring economies and there is little or no control of capital movement. This means that as an investor, you can remit money into and out of the country with little hassle.
This is unlike China where there are strict controls on capital leaving the country (you can only take out 20,000 RMB or 5,000 USD equivalent on every overseas trip) trip to, or even Vietnam.
Stable political and legal environment
Singapore ranks second on the Heritage index and very highly on the Santander Index of Economic Freedom and Business environment and this is evidence of a very stable political and legal environment.
An investor does not need to be afraid of military coups such as in Thailand, anti-corruption drives such as in China, cronyism in Vientam or corrupt ministers in neighbouring countries.
This means that the value of property is unlike to drastically fall, as it does during periods of political or economic turmoil.
Low currency risk
Singapore manages its currency against a basket of frequently traded currencies, and the Monetary Authority of Singapore spells out its currency stance very clearly in their half yearly statements.
This implies that investors can take a reasonable stance and view on the future path of the currency against their home currency, such as the US dollar, Australian dollar or British Pound.
This stance would then translate into whether the investor would buy or sell his or her Singapore property, or for sophisticated investors, whether to hedge their exposure or not.
At the same time, the Singapore government has a very large currency surplus to support the economy in times of distress. For an investor, he or she can rest assured that the government has the necessary tools to support the economy, and by extension, the price of property in the nation.
The large currency surplus is even more so important given the openness of Singapore’s economy
Compared to neighbouring economies, Singapore’s economy is efficiently and prudently managed, as seen in the stable GDP growth of about 2-4% since 2001.
Few viable alternatives in the region
Compared to other countries in Asia, Singapore remains one of the easiest to invest in. Consider Vietnam, Malaysia and Indonesia where the land title system is not as advanced or organized as in Singapore’s if you claim to own a piece of land, someone else can come along and say they are actually the rightful owners.
This case would be then brought to court and valuable time lost in closing the transaction. Personally, I’ve seen this happen in Vietnam, and both parties had to spend significant time and money settling the dispute.
The same situation would also happen in Indonesia. Consider Japan and Korea, an investor would need to know some local language and customs to successfully close a transaction.
China has policy of 70-year leasehold title for residential properties and 40 or 50 years for commercial uses. You can’t transfer the title to future generations once it expires.
There’s Myanmmar, Cambodia and Laos but these are very new and emerging markets with a lot of risk.