Going high, high and high

By I. Christianto and Mehru Jaffer

To live in Singapore is to be immensely proud to be Asian. In most other Asian countries the contrast between those who live well and those who do not fills one sometimes with guilt and at other times with a deep sense of sorrow.

But to be in Singapore is to bask in one's own prosperity and of all those 3.2 million people around one. Singapore is one of the world's most dynamic economies, a thriving commercial and industrial center, a city-state of super opportunities despite its tiny size, or perhaps because of it.

JAKARTA (JP): There are many reasons why expatriates, Indonesians included, want to invest in property in Singapore, as the city-state is regarded as the most dynamic metropolitan in Southeast Asia.

Property expert Panangian Simanungkalit said that due to that dynamism, and certain other reasons, many Indonesians chose Singapore as their second place to own property, including accommodation for their children who study there, a retirement home or just for investment.

"In addition, most Singaporean developers are world-class operators in terms of legal and commercial aspects," Panangian said.

He said buying Singaporean property is almost trouble-free.

"From the legal aspect, buyers can totally trust the developers, that they will get what has been promised. There are also progressive payments based on quality surveyors. And, there is a bank guarantee, that consumers will get their money back if a project is canceled."

All developers, companies and payment systems are well arranged and transparent, he said, adding that legal, financial, governmental and tax issues were also transparent.

He said that such a condition was still relatively hard to find in Indonesia.

He said that many Indonesians had purchased property in Singapore.

"This is due to the historical background of Indonesia- Singapore's relationship, and the two countries are geographically so close," he said.

Panangian said the number of Indonesians buying properties in Singapore increased when riots hit Indonesia in 1998.

"But it's difficult to have the rough figure. I'd say that not only Chinese-Indonesians have bought properties in Singapore, but also those who seek safety and better living conditions," he said.

In 1998, the Singapore Institute of Surveyors and Valuers claimed that among the ASEAN countries, Indonesians were the most potential property buyers in Singapore, he said.

By then, there were about 900 properties bought by foreigners, over half of which were purchased by Indonesians, he added.

Upper class

He said most of the buyers were those from the "A class", whose expectations were high.

"For those who invest in Singaporean property, it's a right decision as we understand the idiom of not laying all your eggs in one basket."

One of the considerations to invest in Singaporean property is buying the right location and property.

Singapore is a small nation. Most preferred locations are District 9, District 10, District 11 and the East Coast.

District 9 and District 10 are long established locations near Orchard, and the center for business, financial markets, universities, transportation and entertainment.

The East Coast is a popular area as it is near the airport.

Panangian said that apartment prices in the popular areas near Orchard was about S$10,000 per square-meter.

"The location is as prime as the central business district in Jakarta, where the rate is about Rp 6 million per square meter."

Beyond the prime location, the rate was about $5,000 per sq mtr, compared to Rp 4 million in, for instance, eastern Jakarta.

Prospective buyers should also do some research of the area they are considering investing in.

A residential property that is not well located will be harder to rent out than a property in a better location, like nearer to schools or universities.

Most properties are condominiums or apartments which feature good security and common facilities such as a swimming pool and a parking lot. Buyers do not need to get approval from the government or the Land Office of Singapore, except for landed houses.

Panangian said that a return on investment might not be as high as properties in certain areas in Jakarta.

He said this was related to the interest rates for housing, which was about 7 percent per annum compared to some 18 percent in Indonesia.

"Second, the capital gain from the value of the land will range only between 5 percent and 10 percent, much lower than the between 20 percent and 30 percent in Kelapa Gading area in North Jakarta," he said.

Other aspects which should be considered by prospective buyers were taxes and servants, especially when properties were not occupied.

In addition to the land tax, unoccupied properties are charged other taxes. This will be costly if the owners must hire house sitters or servants, said Panangian.

He said land tax in Singapore, for instance, was about five times higher than in Indonesia. "So there must be a comprehensive plan, what the properties will be for."

Nonetheless, Singapore will be even more attractive to people due when the ASEAN Free Trade Area (AFTA) is fully implemented by 2003.

"I believe more businesspeople from Indonesia will be flocking there to purchase shop-houses," Panangian said.

Premodern Singapore is remembered for being little more than a home for pirates, tigers and villages. First under the Portuguese during the 1500s then the Dutch 100 years later, it was governed by Sir Thomas Stamford Raffles for the British and declared an official colonial possession of Great Britain in 1867.

Later Singapore grew from a village of a few hundred people into a city of more than 80,000 in the 1860s with a fast-growing, wide-open free port catering to trade, outfitting and transhipment as well as to such unsavory practices as slave trading, drug running, prostitution and piracy.

The start

Between 1873 and 1913 Chinese immigrants began to arrive and together with the British they have gone to define Singapore's present cultural, as well as economic landscape. Singapore developed itself economically primarily on low-level resource- based activities like lumbering, rubber cultivation, fishing, shipbuilding, tin smelting and brick manufacturing during the 1950s. During the 1060s Singapore upgraded its economy by concentrating on international trade and became increasingly export oriented.

By the 1980s Singapore had a regional lead in areas such as electronics, transportation and machinery, and its markets were upgraded with semiconductors, components and high-tech assembly of precision instruments and services like trading, telecommunications and international finance. The two major product categories of one of the biggest harbors in the world remain petroleum and electronics.

Although Singapore is not spared by the outright economic recession, the secret of its success lies in the government's focus on high value-added, clean, advance technologies and on state-of-the-art services, including in property management. In land-scarce Singapore interest in the property market has always been tremendous. Neighboring the four giants of China, India, Indonesia and Indochina, Singapore has much in common with all these countries culturally and despite the economic crisis it remains the gateway for western countries to Asia.

In many a year-end analysis it is concluded that Singapore's remarkable economic recovery last year, growing at an estimated 9.5 percent compared to 5.4 percent in 1999 has given the retail property market a new life, propelled by higher visitor arrivals and consumption expenditure. The government too continued to encourage companies and talented individuals to set up businesses and homes in Singapore in the hope of getting more foreign investments into the country.

"Due to general stability in the country many showed amenability to property investment in Singapore," observed Wong. In the residential market, however, growth was slow as the sentiment of buyers remained lukewarm but not necessarily indifferent.

Consumption expenditure was boosted by an estimated 9 percent increase in visitor arrivals to 7.6 million visitors and a sharp drop in supply of new retail space. The much-anticipated Citylink Mall, the first underground shopping mall in Singapore, opened in mid-2000. Stretching from the City Hall MRT station to One Raffles Link, it provides the long-awaited covered pedestrian linkage between the station and the Marina Center area. The other interesting restoration is of the Old Hill Street Police Station into MITA Building, featuring a glass-roof atrium for art exhibitions, public talks and lunch concerts, supported by galleries, cafes and restaurants has given a new lease of life to the 66-year-old landmark.

Occupancy improved to a high 97 percent island-wide despite the addition of some three million sq ft of private office space with almost full occupancy in the Orchard/Scotts Road corridor. The tight supply situation has promoted retailers to look for space outside of the traditional shopping belt.

Demand from retailers for telecommunications, computer, fashion apparel, books, and food and beverage was strong. The robust economic recovery also attracted foreign retailers, and local retailers are increasingly incorporating e-retailing into their business by launching dot-com services.

Land scheme

The investment sales market was boosted by the government land sales program in 2000, resulting in transactions totaling S$ 6.1 billion. The private investment sales market was subdued, accounting for only 65 percent of total sales compared with 1999's 96 percent. Sale of residential properties underpinned the market with S$ 3.8 billion worth of transactions but the sale of commercial properties worth S$ 1.3 billion was a reflection of the upturn in office rentals.

The forecast is that investors will focus on income-generating properties in the new year. There will be greater opportunities for them to acquire assets given the Monetary Authority of Singapore's directive that financial institutions dispose of their noncore assets within three years. The investment sales market is also expected to enjoy a boost, although developers will probably be more cautious and discerning in their bid for residential sites.

The commercial leasing market and the tight supply situation makes for greater interest in commercial sites. The large site areas and high plot ratios of parcels in the new Central Business District (CBD) at Marina South are expected to attract consortia of a mix of local and regional developers, institutional funds, financial institutions and contractors.

Internet startups, dot-coms and content providers are gravitating to locations with lower rents, high accessibility and food and beverages amenities such as China Square, Far East Square, Chinatown/Tanjong Pagar, Clarke Quay and the Beach Road areas. These locations are chosen also for their somewhat innovative if not off-beat atmosphere to help foster creativity in line with the government's latest initiative to introduce the work-live-play concept.

With the availability of well-specified commercial buildings in accessible locations outside the traditional CBD, improvements of technology and increasing demands of operating in a global environment, some corporations now favour specifications over location in their site selection.

This is reflected in the excellent occupancy and rents achieved in offices located in the Tampines regional center and Novena subregional center.

The DTZ Debenham Tie Leung surveys of the office, industrial, investment, sales, retail and residential sectors predict that the office market trending will be up in 2001. While demand is anticipated to ease from 2000's phenomenal growth, it is likely to remain healthy and with continued expansion of financial services.

The industrial property market powered by a healthy growth in the sector focused demand on hi-tech industrial space increasing the average monthly gross rents by 30 percent. Demand was also supported by the explosive growth in e-commerce and related industries and performance in this sector is expected to gravitate further in favour of hi-tech industrial space.

The good news is that there is much hustle and bustle to look forward to in the increasingly attractive and aggressive property market of Singapore.

Both writers are freelance contributors.