Singapore’s real estate market is among the world’s most expensive. In fact, house costs in the city-state are Asia’s second highest.
You’d have to pay in the range of $2 million just to buy a tiny, two-bedroom apartment in desirable location like Orchard or Central.
Because of these high costs, most locals don’t even own private real estate in Singapore. More than 80% of Singaporeans live in public flats built by the Housing and Development Board (HBD).
To be clear, public housing in Singapore is far better than anywhere else. We’re talking about a wealthy country where one out of every five families are millionaire households.
Such a vast majority of people living in HBD flats is testament to the nation’s wealth inequality though. Private property ownership in Singapore is almost purely for the rich. Everyone else is stuck with rentals and government subsidized apartments.
Despite its economic issues, we’re positive about the long-term prospects of Singapore’s real estate market as a whole.
As investors, we don’t simply look at the price tag in absolute terms – we’re interested in overall value.
Singapore suffered more than two straight years of falling home values before finally reaching a point of reasonability. Yet there’s now a good argument that Southeast Asia’s financial center has plenty of value compared to its peers.
Just because a property market is expensive doesn’t neccessarily mean it’s overpriced.
Real Estate in Singapore is Undervalued
Yes, you read that correctly. We think Singapore is undervalued even though it’s among the most expensive property markets on the planet.
This may sound confusing, but we have a reason.
Analysts often compare real estate prices in Singapore to its less developed peers like Kuala Lumpur and Bangkok, but that’s a mistake. A fairer comparison for Singapore would be with another small, competing financial center like Switzerland.
Singapore is Southeast Asia’s unofficial financial hub, but there’s a limited amount of space on the island. Population density exceeds 8,000 people per square kilometer on average.
This makes Singapore the world’s third densest country. It’s cramped even compared to Hong Kong’s 6,700 people per square kilometer – and especially Switzerland’s 200.
Furthermore, Singapore is the third richest nation in the whole world. Their GDP per capita is more than $90,000.
A wealthier country with less available land should normally have higher property values than their peers. Nonetheless, Singapore real estate is costs under half the price of Hong Kong’s and noticeably lower than in Zurich.
Considering the city’s recent economic growth is also higher than its competitors, you might now understand why Singapore’s property market is potentially undervalued.