In the face of strict mortgage lending and a strong Singapore dollar, more Singaporeans are drawn to the idea of investing abroad, but the central back warns against the move by bringing to light the underlying risks that offshore investments post.
The Monetary Authority of Singapore (MAS) cited two major risks that offshore investments would post to local market such as oversupply of properties and deterioration in economic conditions.
It also noted that the strong interest of Singaporeans to overseas properties led to a 43% rise in the value of offshore property transactions handled by local real estate agencies. Accordingly, Singapore real estate agencies handled USD $1.6 billion worth of transactions abroad, up from USD $1.4 billion in 2012.
As for the highly popular destinations for Singaporean buyers, Britain and Australia are usually on the top list. Britain, in particular, has a certain appeal to Singaporeans as indicated by global consultancy Knight Frank. In its recent report, the firm said that Singaporeans came in second to British buyers in terms of the amount spent in purchasing newly built central London property.
According to the report, as quoted by Reuters, Singaporeans accounted for 23% of all property deals last year, while British buyers took up 27%.
Taking this into account, MAS said that they would keep a close eye on Singapore’s offshore investment activity to limit the investors from splurging on overseas property as it may affect the city-state’s financial stability.
While the central bank worries about the possibility of investors over-extending themselves abroad, David Cheong, associate director of RE/MAX Singapore-Real Centre Properties put forward a different observation.
According to him, Singaporean investors would not retreat abroad as the dropping property prices back home offer lucrative opportunities than anywhere else. Besides, Singapore is reputed for its consistent growth assets owing to the city’s limited land size and political and economic stability.
“Property prices are indeed falling gradually across both residential and non-residential sectors. It can translate that investors are turning to overseas for more profitable deals, but I think investors are more inclined to wait for local property prices to fall further to buy again,” Cheong said to OPP Connect.