Singapore Property Boom

Singapore recently topped the rankings of CB Richard Ellis’ yearly “Top Ten Fastest Growing markets,” report, with a staggering increase in office rental costs of 82.6% in the last 12 months. This comes after recent record growths in the Singapore residential property sector.

In the meanwhile, the city struggles with the issue of increasing costs and rapid growth causing a housing shortage amongst the lower income groups. A construction boom has pushed Singapore’s economic growth to its fastest rate in two years, according to government estimates released on Tuesday.

With rising property costs and luxury condominium developments fueling the growth, many foreign companies based in Singapore are now being faced with the issue of housing their ex-pat workers becoming too expensive. As a consequence, foreigners are moving out of the high cost luxury areas and into lower cost apartment in other parts of the city, causing an increase in property costs further down the chain.

In the three months to the end of June, Singapore’s economy expanded by 8.2 per cent from a year ago as construction grew by 17.9 per cent.

Singapore is building two casino resorts and a new financial centre on the southern edge of the city-state. Property developers are constructing new luxury apartment blocks to accommodate those attracted by the growing private banking industry.

The preliminary forecast, based on data for April and May, said the second quarter experienced 12.8 per cent quarter-on-quarter growth on an annualized rate, exceeding the market consensus of 7.7 per cent growth. It was the best quarter-on-quarter performance since the third quarter of 2003 when Singapore rebounded from a downturn caused by the severe acute respiratory syndrome outbreak. Analysts said that the government was likely to revise upwards its full-year forecast to 6-8 per cent from 5-7 per cent. The economy expanded by 7.9 per cent last year.

“The property boom cycle is only in the early stage, with construction order books looking quite plentiful in the next few years. That will provide strong support for services growth, particularly financial and business services,” said Chua Hak Bin, regional economist with Citigroup in Singapore.

Lee Kuan Yew, Singapore’s elder statesman, recently predicted that the city-state was poised for “a golden age” over the next five years owing to its transformation into a private banking and gaming centre.

However, analysts warned that the impressive growth could pose economic challenges, including higher inflation. That could force the government to increase the value of the Singapore dollar. A stronger currency could affect exports. In the interim, Singapore is fast becoming a property investment regional hub and this presents big opportunities for investors who can identify the right deals.

Singapore Economy

Singapore has a highly developed market-based economy, which historically revolves around extended entrepot trade. Along with Hong Kong, South Korea and Taiwan, Singapore is one of the Four Asian Tigers. The economy depends heavily on exports refining imported goods, especially in manufacturing. Manufacturing constituted 26 percent of Singapore's GDP in 2005. The manufacturing industry is well-diversified into electronics, petroleum refining, chemicals, mechanical engineering and biomedical sciences manufacturing. In 2006, Singapore produced about 10 percent of the world's foundry wafer output. Singapore is the busiest port in the world in terms of tonnage shipped. Singapore is the world's fourth largest foreign exchange trading centre after London, New York City and Tokyo.

Singapore has been rated as the most business-friendly economy in the world, with thousands of foreign expatriates working in multi-national corporations. The city-state also employs tens of thousands of foreign blue-collared workers from around the world.

In 2001, a global recession and slump in the technology sector caused the GDP to contract by 2.2 percent. The Economic Review Committee (ERC), set up in December 2001, recommended several policy changes with a view to revitalizing the economy. Singapore has since recovered from the recession, largely due to improvements in the world economy; the Singaporean economy itself grew by 8.3 percent in 2004, 6.4 percent in 2005 and 7.9 percent in 2006. In the first half of Year 2007, the economy grew by 7.6 percent. The growth forecast for the whole year is expected to be between 7 percent to 8 percent, up from the original estimation of 5 percent to 7 percent. On August 19 2007, Prime Minister Lee Hsien Loong announced in his National Day Rally Speech that Singapore's economy is expected to grow by at least 4-6 percent annually over the next 5-10 years.

The per capita GDP in 2005 was US$26,833 and the unemployment rate is 1.7 percent as of October 2007, a record ten year low. In 2006, there were 173,000 new jobs being created, a record high. In the first half of Year 2007, 111,000 new jobs were created, reaching another breaking record.

Singapore introduced a Goods and Services Tax (GST) with an initial rate of 3 percent on 1 April 1994 substantially increasing government revenue by S$1.6 billion and stabilizing government finances. The taxable GST was increased to 4 percent in 2003, to 5 percent in 2004, and to 7 percent on 1st July 2007.

Singapore is a popular travel destination, making tourism one of its largest industries. About 9.7 million tourists visited Singapore in 2006. The Orchard Road district is the centre of shopping hub in Singapore. To attract more tourists, the government decided in 2005 to legalize gambling and to allow two Integrated Resorts to be developed at Marina South and Sentosa. To compete with its many rivals such as Hong Kong, Tokyo and Shanghai, the government has announced that the city area would be transformed into a more exciting place by lighting up the city completely. Other than the Integrated Resort, about 15 new developments are coming up, which include the Singapore Flyer, which would be the largest Ferris wheel in the world, the Gardens by the Bay and a 280-metre Double Helix Bridge. Cuisine has been heavily promoted as an attraction for tourists, with the Singapore Food Festival in July organized annually to celebrate Singapore's cuisine.

Singapore is also growing its medical tourism sector. 230,000 foreigners sought medical care in the country in 2003 and Singapore medical services are aiming to serve one million foreign patients annually by 2012. In doing so it is hoped to generate $3 billion in revenue and create at least 13,000 new jobs within the health industries. Singapore hospitals are actively engaged in international healthcare accreditation, at least partly as a by-product of this desire to grow the income from medical tourism.

Under the Infocomm Development Authority of Singapore (IDA), Wireless@SG is a government-initiated initiative to build Singapore's Infocomm infrastructure. Working through IDA's Call-for-Collaboration, SingTel, iCell and QMax deploy a wireless network throughout Singapore. Since late 2006, users have enjoyed free wireless access through Wi-Fi under the "basic-tier" package offered by all three operators. This will last for 3 years.

CBRE
CB Richard Ellis Real Estate Services
Singapore Government
Useful information on Singapore