ASEAN-Russia: Foundations and Future Prospects

The Best Cities to Buy Into

269 THE BEST CITIES TO BUY INTO Alexander Karolik-Shlaen SINGAPORE — AN ATTRACTIVE REAL ESTATE TARGET As the Russian economy is diversifying beyond oil and gas, investing in Singapore is the perfect diversification. The Singapore economy is based on services and on being the banking and tourism attraction of the region, the total opposite of the natural resources based Russian economy. One of the most attractive aspects of Singapore is its property, be it commercial, which is in big demand from corporations and businesses from all over the world, to residential, which is the safe haven for investors of the region and beyond. Hence, Singapore property is in high demand from both international investors and locals. In fact, the demand is so high that the Government of Singapore is acting to curb the excessive demand for residential property, which most likely eliminates the short-term speculators and opens the market to longer term, deep pocket investors, which means more stability to invest in. I will focus on the high-end residential property. SIGNS OF THINGS TO COME — A MACRO AND MICO PERSPECTIVE So, what has changed since the Singapore government slapped the market with yet another cooling measure? In general, not much when it comes to the high-end and luxury real estate sectors. The highest end of the market will continue to rise, if slowly, 270 Alexander Karolik-Shlaen because the highest end never really fully recovered. Also, more people in Singapore have more money, and they will buy more luxury properties. That is evident by the fact that prices of good class bungalows (luxury villas) are 20 per cent up during the past year (2010). On the other hand, development charges are up, foreign labour numbers down while their licensing prices are up. And commodities prices are up again as well. All this means properties will cost more to construct. To summarize Singapore’s situation, the government is acting to protect the mass market from overheating, sending a clear signal ahead of elections that the mass market will not be left to boil over. But not all is rosy on the real estate horizon. Singapore reported more than five million residents last year, a handsome growth of population, which is very much behind the demand for the property and rise in prices. Should the government limit inflows of foreign talent and tighten permanent residents’ numbers, there will be a softening of demand for property across the board. Hence, these inflow numbers should be watched. A FEW RECENT MACROECONOMIC FACTORS • The Singapore dollar is strong versus many currencies, and is considered a safe haven currency by many investors. • Singapore is further strengthening its position as a regional hub for many banks and multinationals. • China could become the world’s biggest economy within a matter of years, and its real estate will soar no matter what cooling measures are introduced. Chinese will invest vigorously overseas, and Singapore is one of the potential hotspots on their radars. • Just three years ago Asia was just a major emerging market, one that supplied and manufactured goods for the West. But after the economic meltdown the picture has changed. The West is still in the grip of recession and everybody is expecting more bad news from Europe and the U.S. At the same time Asia is booming, leading many to realize the world’s economic centre of gravity is shifting from West to East. This also means a bigger flow of money from the West to Asian financial markets and properties, with Singapore likely to take a good share into its private banks and real estate. Throughout the region’s major markets, developers, investors and regular folk are not buying into the “cooling measures” of their governments. Real estate in Asia retains its attractiveness for Asians themselves, and especially The Best Cities to Buy Into 271 for mainland Chinese. A few months ago I wrote in my article “China: A long term buy”, which was published in the regional real estate magazine Property Report, that the real estate market there is still performing strongly, simply because people there are in love with real estate and do not trust financial markets any more. And in fact, the Chinese real estate market is still performing strongly despite the aggressive cooling measures introduced by the government. Governments in the region will probably have to intervene further and more aggressively, especially in China, so strong...