Big corporations like Singapore’s ease of business

The population of Singapore has risen 26 per cent in the decade to the end of 2012 – not surprisingly as a series of reports have shown this wealthy island state is the best value city for overseas business.

The World Bank has ranked it as the easiest place to do business for seven straight years.

The city offers businesses the best property-rental value compared with the size of its economy.

Big corporations love Singapore.

Why invest property in Singapore

Standard Chartered has the global headquarters of its private bank and its biggest trading floor in Asia in the country, which has also become a commodities hub as Asia’s biggest oil-trading market for BHP Billiton, ExxonMobil and Chevron.

“The value of real estate is higher where more corporate revenue can be generated,” said Yolande Barnes, the director of Savills world research. “It is worth paying more to accommodate an executive team in Singapore with its high GDP than in the low GDP Mumbai.”

The survey showed that Sydney, Moscow and New York City were next after Singapore in terms of business value.

In April, Singapore overtook Japan as Asia’s biggest foreign-exchange centre for the first time, according to data from the city-state’s central bank.

The market in Singapore is booming, and Savills said the property investment sales market had recorded US$13.4 billion (Dh49.21bn) worth of deals in the third quarter of 2013, which accounts for the highest quarterly transaction value in the past five years.

Singapore’s property costs, at $1 million per year, are sixth highest of the 10 cities, the Savills rankings showed. Prices were calculated for residential and office spaces for 14 employees plus households.

The highest total costs were $1.63m per year in Hong Kong and the cheapest $444,000 in Mumbai, based on Savills criteria.

However, the Singaporean government’s programme of providing residential housing for its citizens means that the property market could be destined for a sizeable correction of up to 20 per cent by 2015.

“We believe the risk of a residential property market correction in the next two years is rising, as expected higher interest rates look set to coincide with a large increase in housing supply over 2014-15,” Tricia Song, an analyst at Barclays, wrote in a report last month.

Barclays believes that prices will remain flat this year, before falling 5 per cent in next year and a further 5 to 15 per cent in 2015.

Sales were hit in June after the government unveiled new rules governing how financial institutions grant property loans to individuals.

Prices have soared more than 60 per cent since mid-2009, with the increase prompted by low interest rates.

CapitaLand and City Developments, Singapore’s two biggest publicly traded developers, have said in the past two months they expect “headwinds” in the property market because of the government curbs, Bloomberg reported.

Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a campaign, in place for more than four years, to curb speculation in Asia’s second-most expensive housing market, Knight Frank and Citi Private Bank said in a report.

There have been nine rounds of market-cooling measures since 2009, most recently targeted at the public housing market, which accommodates 80 per cent of the state’s citizens.

The measures announced in August included shortening the maximum loan tenure to 25 years from 30 years, and reducing the mortgage ratio limit against the borrower’s salary to 30 per cent from 35 per cent previously.

The government has made a policy of expanding the supply of housing on offer as it seeks to increase the population. A huge supply of both private and public housing is expected to come on-stream next year.

The Urban Redevelopment Authority says nearly 95,000 private units will come on to the market over the next five years, alongside 25,000 to 27,000 public housing flats per year. “Total housing supply could average 40,000 units per annum and peak at 47,000 in 2015 – significantly above the historical average annual supply of 12,300 units,” Ms Song says.

The Real Estate Developers’ Association of Singapore (Redas) believes these plans offer tremendous opportunities in Singapore.

Chia Boon Kuah, the president of Redas, said last month that projects in the Tanjong Pagar and Paya Lebar areas would be the biggest blank slates to develop since Marina Bay.

The government will transform Tanjong Pagar into the next waterfront city when the container ports are relocated to Tuas, after its lease expires in 2027, while more land will also be made available for residential and industrial use in Paya Lebar after the military airbase located there moves to Changi.

Redas says the future holds “exciting possibilities, even as the property market takes its course through the cycle of business”.

Singapore’s home sales rose in August after developers marketed more projects, rebounding from July when they slumped to the lowest since December 2009.

Home sales increased 54 per cent to 742 units last month, compared with 482 in July, according to data from the Urban Redevelopment Authority. Sales in August 2012 were 1,427 units.

To curb speculation, the government also tightened loan-to-value limits for buyers seeking a second mortgage, referring to the amount they are allowed to borrow relative to the value of their properties.

The cash down payment would rise to 25 per cent from 10 per cent starting from the second loan, it said.

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Big corporations like Singapore’s ease of business

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