Singapore Tightens Rules on Foreign Property Ownership in Latest Market Restriction

Singapore now requires foreigners to seek government approval when investing in mixed commercial and residential property, as authorities put up a new firewall attempting to insulate the local market from foreign speculators.

The Ministry of Law and the Singapore Land Authority (SLA) announced on Wednesday introduced updates to the Schedule of Non-Residential Properties under the Residential Property Act (RPA) to “safeguard residential land for Singaporeans.”

As sites or developments zoned for both commercial and residential use are predominantly used for housing, they have been removed from the non-residential list from Thursday and are now regulated under the RPA. The policy change means foreign individuals and companies will now have to obtain approval when investing in such properties.

Although it is widely expected to have minimal impact on the market, Lee Sze Teck, senior director for research at Huttons Asia said unclear rules could create uncertainty among investors.

“The change may be seen as a pre-emptive move to prevent over-concentration of ownership in a development by a foreign person which includes non-citizens of Singapore,” Lee said. “It may create uncertainty in the investment sales, collective sales and shophouse markets in the interim as market players seek clarity on the new rules.”

More Hurdles For Foreigners

Foreigners who are existing owners of developments zoned for mixed-use commercial and residential will only need to secure approval under the RPA if they plan to redevelop the property, the Ministry of Law and SLA said.

For affected transactions that already had secured an option-to-purchase (OTP) granted before 20 July would be exempt from the required RPA approval if they exercise those options by 9 August, the authorities said.

Colliers Singapore research head Catherine He considers the move an additional barrier to foreign ownership of property in the city, but said it is unlikely to deter foreign developers already planning to acquire greenfield sites or redevelop existing properties.

“There has yet to be any precedent of a foreign individual or entity rejected, and is more likely put in place to safeguard the planned use of these sites/projects,” He said.

Wong Xian Yang, research head at Cushman and Wakefield, shared a similar view, noting the longer approval process will not have a material impact on the market although the criteria for approval remains unclear.

The policy update is expected to have an impact on trades of shophouses and strata-titled assets in commercial-and-residential-zoned developments, said Huttons’ Lee.

These small-scale assets have been popular among foreign investors as seen in the series of deals struck so far this year, including the sale of six conserved shophouses in the Boat Quay area to an unnamed Chinese investor reported by local media late last month.

In the collective sale market, Tan Hong Boon, an executive director with the capital markets team at JLL in Singapore, expects the impact to be “fairly benign” as the additional approval process will be similar to seeking permission for en bloc purchases of residential sites under the city-state’s Qualifying Certificate scheme, which compels foreign developers to finish construction within five years and sell all units two years after completion.

US Overtakes China as Top Buyer

The new regulations are the latest move by Singapore authorities to cool a real estate market which saw home prices rise 8.6 percent in 2022, with the government having doubled the Additional Buyer Stamp Duty on home purchases by non-resident foreigners from 30 to 60 percent on 27 April.

With most foreigners now deterred from buying in Singapore, just 56 homes were sold to non-residents in the second quarter, according to OrangeTee & Tie Research & Analytics. As Americans are exempt from the ABSD under a tax treating, US citizens displaced mainland Chinese as the biggest buyers of Singapore housing during the period for the first time since 2017.

“Americans may continue to be among the top foreign buyers here since they are less affected by the increased ABSD,” OrangeTee said. “Other foreigners may switch to buying non-residential properties.’

Overall, condos purchased by foreigners fell by nearly a quarter to 205 units in the April through June period, from 265 homes transacted in the first three months of the year, following the April tax hike.