Monday, September 12, 2011

Foreign home buyers: Indonesians still a force to reckon with


Although mainland Chinese buyers have, in recent times, helped boost Singapore’s private property market, one must not forget the Indonesians – who have been faithfully snapping up properties here for more than a decade.

While Indonesian buyers now take a backseat to the Chinese when it comes to making purchases, they are still a force to reckon with, as they remain among the top three foreign buyers of local property. A large proportion of their purchases are made between the $1.5 – 5 million price range, though in absolute numbers their buys have, of late, ranked below the Chinese.

According to date from the URA, more than half of the 1,706 Indonesian (including PRs) who snapped up private homes here last year paid upwards of $1.5 million. And at the upper end of the market where a home costs upwards of $5 million, Indonesian buyers came in tops, with 98 buys.

So far in 2011, their activity in the highest end of the market has seen them snap up 41 residences, slightly below the 48 acquired by mainland Chinese buyers.

Some market watchers believe that the Indonesians will continue to be one of the largest foreign buyers of Singapore residential property for years to come, despite the recent large influx of wealthy Chinese and Indians into the market here.

“Indonesia is enjoying an unprecedented period of political stability and economic growth. With this positive climate, we see the benefits, and investments into Singapore in all areas can only get better,” said Christopher Fossick, managing director of Singapore & South-East Asia at Jones Lang LaSalle (JLL).

So positive is JLL on the Indonesian market that it recently acquired its long-time partner in Indonesia for an undisclosed sum to form the largest real estate services company in the country. It is banking on Indonesia’s growing economy, large population and penchant for making property purchases overseas – which it says will continue to grow.

“The Indonesian economy is the largest in South-East Asia (SEA), and we saw the potential that Indonesia provided JLL to grow its business presence in SEA and Asia,” said Mr Fossick.

“We are bullish on Indonesia’s economy to grow (at an expected 6.5% per annum)… We see the opportunity to assist Indonesian investors to invest their money in real opportunities outside of Indonesia, in particular in Singapore, China and as far afield as the UK and USA.”

Ong Teck Hui, head of research and consultancy at Credo Real estate, notes that Singapore properties are favoured by Indonesians because many commute here frequently for business dealings. Also, a significant number have family members here, with children attending schools in Singapore. Many also come to Singapore seeking medical and healthcare services. It therefore makes good sense for them to invest in Singapore properties.

“But a key reason why Indonesians invest in our property market is their perception of Singapore as a safe haven for their investments,” said Mr Ong. “They have experienced political uncertainty in Indonesia, for example, the violence in the May 1998 riots, and feel more comfortable parking some of their wealth in Singapore which has enjoyed political stability and economic success.

“For this reason, Indonesians will continue investing in Singapore residential properties,” said Mr Ong.

Wealthy and keen to splash on new home purchases, much of their buying centres within the traditional prime districts of 9, 10 and 11, say market watchers. “In recent years, prestigious Singapore residential launches like Nassim Park Residences, Tate Residences and The Grange were very well-received by the Indonesian market,” noted Mr Fossick.

This is because these districts form the most central location in Singapore, “which offer an array of interesting living experiences such as shopping and entertainment at convenience”, said Cushman & Wakefield’s senior manager of research in Asia-Pacific, Ong Kah Seng.

“The place has also been well- and long-positioned as a prestigious living area, and homes in the vicinity have higher collective sale redevelopment potential when they are physically or economically obsolete,” added Mr Ong.

Increasingly, however, a growing group of Indonesians led mostly by the young, are also starting to favour properties in lower- or mid-priced neighbourhoods in off-city locations.

“There are increasing numbers of young Indonesians, like those who have been educated in Singapore, who find Singapore as a good value proposition as it is close to home, and Singapore’s currency is fairly stable,” said Cushman’s Mr Ong. Buying a home here therefore offers these younger Indonesians an opportunity to be independent and yet enjoy accessibility to their hometowns in Indonesia.

“The live, work, play concept, especially in suburban locations, and improved connectivity through numerous new MRT stations also provide opportunities for the value of non high-end residential properties to appreciate,” said Mr Ong.

Property developers here also report that Indonesians now fancy a wider pool of properties across different locales.

Chia Boon Kuah, chief operating officer (property sales) at Far East Organization, said: “They have traditionally purchased homes in the Bukit Timah, CBD and East Coast areas. Some of these are The Clift in the CBD, Floridian on Bukit Timah and The Cape at Amber Road.”

“However this year, they have also shown strong interest in homes situated in new growth areas like euHabitat in Jalan Eunos and Waterfront Isle which faces the Bedok Reservoir.”

Indonesians make up about one fifth of Far East’s foreign clientele, and have consistently ranked among the top three, he said.

CapitaLand said that its upmarket Urban Resort Condominium and Latitude have attracted a particularly high percentage of Indonesian home buyers, who so far account for about 50% of the units sold at the former and a quarter of sales at the latter.

“On one end of the scale, the wealthy Indonesians only buy into area like Ardmore Park and Cairnhill Road, close to landmarks like Paragon and Mount Elizabeth Hospital. On the other end, middle-class Indonesians have shifted to the suburban areas of the East Coast, Novena/Balestier Road and the West Coast. In between, Newton Road and River Valley Road remain favourite destinations,” said Mr Fossick.
Source: The Business Times

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