The Singapore Family Office
Family offices are private wealth management firms that serve ultra-high-net-worth families and offer a variety of services, such as investment management, tax planning, estate planning, philanthropy, and lifestyle management. In recent years, family offices have become a significant player in the global economy and have a major impact on various industries, including real estate.
Singapore is a hub for family offices in Asia and is a popular location for ultra-high-net-worth individuals due to its favorable tax policies, strong legal system, and excellent infrastructure.
In 2022, the Monetary Authority of Singapore decided to increase the minimum amount of assets that family offices had to manage, in order to be registered under the S13O scheme. This amount went up to S$10 million and had to be increased to S$20 million within two years. This change might have contributed to the rise of family offices in the region. In fact, in just one year, the number of family offices increased by 75%, from 400 to 700, as reported by Lianhe Zaobao.
Family offices are drawn to real estate investments for a variety of reasons, such as its stability and ability to protect against inflation, as seen through its correlation with the Consumer Price Index (CPI). Setting up a family office can also be a way for individuals to secure permanent residency and citizenship in Singapore.
Chinese investors, who are rooted in cultural values that highly value properties, have always been drawn to real estate investments. One notable example is a Chinese national who purchased 20 units of CanningHill Piers for over S$85 million in 2022, despite the 30% Additional Buyer’s Stamp Duty. Another example is a Chinese-Singaporean permanent resident who bought an entire floor of Suntec City Tower 2 for $38.8 million, making it the largest and most expensive transaction of the year.
Family offices play a significant role in the Singapore real estate market and have had a noticeable impact on the demand for luxury properties, property prices, and market trends. They tend to focus on long-term investments and have had an influence on real estate development and urban planning in the country.
1. Impact on Demand for Luxury Properties
Chinese nationals have been driving the surge in foreign purchases of luxury properties in Singapore this year. The city-state, known for its stable politics, strong currency, and reputation as a safe haven, is attracting wealthy buyers from China, who accounted for about 20% of the 425 luxury units (priced over S$5 million) sold from January to August. In comparison, Americans bought 34 units, and Indonesians 28. According to CNA “Wealthy Chinese nationals snap up luxury homes in Singapore despite tax hikes”
While China’s property market is struggling with declining sales and developer defaults, Singapore’s property prices have consistently risen, making it an attractive option for wealthy individuals seeking to park their assets in a safe and secure location. The government’s recent decision to raise taxes for property purchases has not deterred foreign buyers, as the number of luxury units sold to foreigners this year has already surpassed the numbers sold in 2018 and 2019.
Despite the hike in taxes from 20 to 30% in duties for foreign buyers, Singapore remains a popular destination for wealthy individuals. With its stable politics, strong currency, and reputation as a safe haven for assets, it’s no surprise that the country has seen an increase in the number of luxury units sold to foreigners. Chinese nationals, in particular, have been leading the charge as the country experiences a slowdown in its own property market and consumer confidence is impacted by COVID-19 lockdowns. The data shows that the number of luxury units sold to foreigners, including those with permanent residency, has exceeded pre-pandemic levels, proving that Singapore property remains a desirable investment for the wealthy.
2. Influence on Property Prices and Market Trends
Family offices have had an impact on property prices in Singapore, particularly in the luxury segment. As they tend to invest in exclusive properties and prime locations, they have helped to drive up prices and set market trends. Additionally, their focus on long-term investments has had a stabilizing effect on the market, reducing fluctuations in property prices and contributing to market stability.
Comparing 2021 and 2022 sales of bungalows sold in Sentosa cove. The average price of bungalows transacted in 2022 was 8.35% higher ($1,940 psf) compared to the previous year ($1,778 psf), even though the transaction volume may have been lower.
There were a total 26 bungalows that changed hands in 2021. The number of transactions recorded based on caveats lodged for 2021 and 2022 does not reflect the picture on the ground. “In 2021, at least 15 bungalows were sold without caveats lodged,” and “And in 2022, there were 10 such deals.” says Steve Tay, Senior associate. Edgeprop “Prices of luxury homes in Sentosa Cove ‘at a tipping point’
3. Influence on Real Estate Development and Urban
Family offices have had a significant impact on the development of the real estate market and the urban planning in Singapore. They tend to focus on high-end developments and prime locations, which has led to the creation of new, upscale neighborhoods and has shaped the city’s urban landscape. Their investments have contributed to the development of new infrastructure and amenities, making the city more attractive to both residents and investors. This, in turn, has had a positive effect on the overall economy, creating jobs and boosting the property market.
Family Office have the resources and expertise to manage large-scale real estate projects, which has led to the development of new projects, such as luxury condominiums, shopping centers, and other high-end developments.
One such example is that of 8 Shenton Way where at 305m, a new super penthouse residence will be in Singapore. This building will be the tallest in the country, standing at 305 meters. It will also be one of the most environmentally sustainable skyscrapers in Asia and the first supertall building in Singapore, defined as a building over 300 meters tall.
8 Shenton Way is owned by a group of developers led by Perennial Holdings, with Alibaba Singapore, a subsidiary of Alibaba Group Holdings listed on the NYSE, owning half of the development. The consortium also includes Chip Eng Seng, Sing-Haiyi Emerald, Piermont Holdings, and HPRY Holdings.
This new development will feature 1.6 million square feet of space including retail, office, hotel, and high-end residential units.
This building will features the use of antimicrobial materials, optimized air flow and filtration, and its building design is inspired by bamboo forests with a stepped and vertical arrangement.
Family offices have played a role in the creation of innovative urban planning strategies and the implementation of sustainable development initiatives. They have invested in green buildings and environmentally friendly infrastructure, which has helped to reduce the environmental impact of the real estate market and promote sustainable development.
Overall, the presence of family offices in the Singapore real estate market has had a positive impact on the city’s urban planning and development. By investing in high-end developments and contributing to the creation of new infrastructure and amenities, they have helped to shape the city’s urban landscape and improve the quality of life for residents and investors alike.
4. Focus on Long-Term Investments
Singapore is setting new standards in the family office space. Business Times “How Singapore is setting new highs in the family office space”
As Asia continues to rise as a global economic power, the migration of family offices to areas of growing wealth has followed suit. This trend is expected to persist as Asia’s wealth matures, with an impending intergenerational wealth transfer in the coming years. With many Asian family offices in their early stages, this is leading to an increase in demand for family office services such as succession planning.
Family offices have a strong focus on long-term investments, which has had a significant impact on the real estate market in Singapore. Unlike other investors who prioritize quick returns, family offices aim to hold onto their investments for extended periods, providing stability and reducing market fluctuations. This approach has contributed to a more sustainable and robust real estate market in Singapore.
Family offices also tend to avoid speculative behavior, further enhancing the stability of the market. By taking a patient and strategic approach to their investments, family offices are helping to create a solid foundation for the real estate market in Singapore, enabling it to withstand market cycles and continue to grow and thrive.
Conclusion
The increase of family offices in Singapore, driven by favorable tax policies, a strong legal system, and a favorable economy, has had a noticeable impact on the demand for luxury properties, property prices, and market trends.
With their focus on long-term investments in exclusive properties and prime locations, family offices have helped drive up prices, set market trends, and contribute to the stability of the real estate market. They have also had a significant impact on real estate development and urban planning, shaping the city’s urban landscape and creating new upscale neighborhoods.
Despite a recent increase in taxes for foreign buyers, Singapore remains a popular destination for wealthy individuals, particularly Chinese nationals, who see it as a safe haven for their assets.
