As Singapore property market hits the lowest slump, wealthy Indonesians have increased luxury housing demand.
Indonesians have bought four times more homes valued at S$5m or $3.7m and above this year in comparison to last year. The rise in the purchases coincides with the passing of a Jakarta law meant to make Indonesians repatriate or end up paying taxes for the approximately $300 billion taken to Singapore during the unrest. Top foreign buyers for the OUE Twin Peaks were Indonesians.
According to Ang Kok Leong of SLP Realty Pte Ltd, the Indonesians motivation in buying property is based on Singapore’s move of sharing financial information with the adoption of global tax reporting requirements, where countries tell each other of nationals with assets abroad. Agents are of the opinion that by buying property, Indonesians are counting on that only bank assets information will be shared and not in property.
Information by Urban Redevelopment Authority indicates that Indonesians bought 30 properties of S$5m and above between January and August 17 in comparison to 8 properties transacted in the whole of 2015.
Cushman & Wakefield data show that in H12016, Indonesians purchased 189 properties in Singapore, a rise by 23% for a similar period last year.
Of course, some Indonesians are not buying property to avoid paying taxes but due to the value they see. Indonesians are attracted to property in the core central region especially Orchard Road, the location of OUE Twin Peaks.
According to Propnex Realty Pte Ltd, almost half of OUE Twin Peaks first batch of 86 units that went up in July were sold. The price was up to S$4 m with the top foreign buyers being Indonesians. This was a surprise considering that Marina One Residences only sold 3 out if its 200 units to Indonesians.
It also seems Indonesians have a soft spot for property close to hospitals since they go to Singapore for medical checkups. This explains why at Cairnhill Nine, 42 out of the 211 apartments costing between S$1m to S$4m were bought by Indonesian citizens earlier in the year, according to Cushman & Wakefield data. Cairnhill Nine is near two hospitals.
The Indonesian tax amnesty plan that was passed in June is meant to repatriate cash hidden overseas and to give evaders an opportunity to come clean. Based on the plan, the Indonesians should pay 4% tax on funds or property abroad. Close to March, the rate increases to 10%. Those who repatriate the cash and keep it there for three years in the least pay 2%. Those who fail to declare and are caught will pay 200% of owed tax.
The amnesty is expected to attract S$5b to S$9b of money deposited in Singapore, wrote Sanford C Bernstein analysts.