Singapore’s real estate market booming on rising number of Chinese buyers

The growth of the very wealthy Chinese population living in Singapore will likely create more trade and investment ties between the two countries.

Singapore’s property market is showing much greater resilience than others around the world despite concerns over slowing economic growth both regionally and globally. One of the reasons for this is the influx of Chinese nationals, who Account for the largest number of non-resident home buyers in Singapore.

The island nation is considered politically stable and free from natural disasters and its real estate is seen as a wise investment by many around the world. Singapore’s relative stability compared to its regional peers, along with its attractive income tax rates, apparently makes the heavy tax on foreigners with property worth paying.

According to Singapore-based real estate agency platform OrangeTee & Tie, mainland Chinese bought 391 condominiums in the city-state in the second quarter of 2022, compared to 281 in the first quarter.

The numbers are down from last year – 467 in Q2 and over 400 in Q3 and Q4. The decline in sales to Chinese citizens in the first quarter of 2022 was attributed to the rise of the Omicron variant and its impact on regional travel.

Why are wealthy Chinese investing in the Singapore property market?

Christine Sun, Senior Vice President of Research and Analytics at OrangeTee & Tie Told the South China Morning Post that Chinese citizens buying in Singapore mainly focus on the luxury real estate market. More and more wealthy Chinese are buying real estate, often newer luxury apartments, Sun told the newspaper.

According to FinancialTimes, Chinese tycoons are leaving en masse after enduring political crackdowns, severe Covid lockdowns and unease about Beijing’s global reputation. With little end to the Covid-19 lockdowns in sight – as of September 6, around 12% of China’s total GDP was affected by Covid checks on a weighted basis – many wealthy people are looking for new places to live and do business.

Why Singapore?

Anecdotal reports suggest that wealthy Chinese are pouring into Singapore’s hotels and resorts. The city-state is reportedly becoming the top destination for Asia’s wealthy, overtaking Hong Kong after Beijing asserted its authority over the former British colony.

Singapore, which was a British colony for 144 years until 1959, became a low-tax business hub in the late 20th century. It had become a destination for many Chinese tycoons to protect their money there in offshore funds, but with China’s rise, few had sought to emigrate to the island state.

Additionally, Singapore has long been a preferred destination for establishing a regional headquarters to seek business opportunities in ASEAN and Asia. This has been attributed to the country’s favorable tax and legal regimes, allowing the city-state to develop into a leading global financial center and attracting over 37,000 international companies and 7,000 multinational companies.

The Singapore real estate market

Despite global economic concerns and rising interest rates, home sales in Singapore rebounded in July to the second highest level this year. Purchases of new private apartments reached 834 in July, up from 488 units sold in June. As Bloomberg pointed out, the city-state’s real estate sector has been buoyed by an influx of wealthy buyers, especially those from China.

The influx of buyers from China comes despite overseas buyers being submitted an additional stamp duty of 30% on purchases since January. Stamp duty for citizens is tiered, starting at one percent on the first S$180,000 of property value and an additional two percent on the next S$180,000. The top level is only four percent.

Nationals of the United States, Switzerland, Liechtenstein, Iceland and Norway are exempt from the 30% “additional buyers stamp duty”. Permanent residents of Singapore pay an additional 5% while citizens only pay the basic stamp duty rate of their first home.

Chinese buyers had an abundance of newly built luxury private homes to choose from, with fixed prices of up to S$3 million (US$2.17 million) per unit. According Sun of OrangeTee & Tie’s, about half of Chinese buyers live in their apartment, while the rest use the property for investment or rental purposes.

Evidence suggests that property prices in Singapore continue to grow despite a cooling in other parts of the world. Private property values climb 3.2% in the three months ending June 30, as hundreds of social housing apartments are currently underway sold for over one million Singapore dollars (US$716,000), Reuters reported in August. However, the surge in the public housing market has been widely attributed to Covid-19 building disruption and general shortages.

The public housing system – which sells state-built flats directly to citizens on a 99-year lease – has enabled more than 80% of Singaporeans to own their homes. While leases are transferable between citizens and permanent residents after five years, a resale market has emerged. Although it is worth noting that private accommodation, with facilities such as swimming pools and gyms as well as security protection, is much more likely to attract very wealthy Chinese migrants.

Singapore’s rental market has also warmed up. Prices skyrockets more than any other city surveyed, with an 8.5% increase in the first half of 2022, according to a Savills study of 30 cities around the world.

What does this mean for Singaporeans?

On the one hand, if Chinese citizens continue to buy houses in the city-state –

who only has 1.2 million apartments – this will add upward pressure on property prices. But whether this additional wealth will trickle down and benefit Singaporean nationals is another matter.

Trickle-down economics has been criticized as a flawed principle by economists and concerning countries around the world. While some of these very wealthy Chinese migrants may installation businesses or family offices – in Singapore, setting up a family office typically requires at least S$5 million in assets – there is no guarantee that this will impact Singaporean citizens.

One thing we can be reasonably certain of is that the growing size of the very wealthy Chinese population living in Singapore will likely serve to create more ties between the two nations.

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Penny D. Jackson