Foreign buying in Singapore's home market nosedives to just 7.6%

A triple whammy of factors have been swatting them away.

BNP Paribas, in its latest report, says that foreign buying has deteriorated in 2015, compared to 2014 and 2013 based on their trend analysis.

The report attributes this to three factors: currency weakness in MYR, IDR, and RMB; punitive ABSD of 15% to foreign buyers even for first homes in Singapore (imposed in 2013), and; tight immigration policty to restrict foreign employees to Singapore, which may have partly shrunken foreign buyer pool.

Here's more from the report:

As a result, homes transacated by foreigners fell sharply. In 1Q15, foreign buying accounted for 7.6% of total home transactions, down from 11.3% in 1Q14.

By sub-segment breakdown, homes transacted by foreigners in 1Q15 accounted for 13.3% of high-end segment, down from 17.4% a year ago (in 1Q14). Similar trend happened in mid-end (6.0%, down from 8.5%) and mass market (6.7%, down from 11.5%) segments.

By nationality, foreign buyers from Malaysia, Indonesia, and China were especially hit hard dure to currency weakness.

Nonetheless, in 1Q15, China was the top foreign buyer in Singapore, followed by Malaysia and Indonesia.

Given the slack in foreign buying, it becomes clear that the housing market needs to turn to local buyers for support. Unfortunately, BNP Paribas is not confident of the strength of the local support, given easing of pent-up demand, ongoing credit tightening, and prospects of rising intereste rates. All these factors tend to dampen local buyer demand.