Overview – Singapore: Real Estate
Contributor: WongPartnership LLP
Authors: Dorothy Marie Ng, Monica Yip, Tan Teck Howe, Cornelia Fong and Serene Soh.
Singapore’s real estate sector has in recent years seen much activity in:
• Placemaking: Having identified placemaking as being critical in contributing towards a liveable city, efforts are being made to shape thriving areas and form strong communities. This includes creating viable precincts and attractive destinations and rejuvenating familiar areas (such as cultural precincts and historical districts) to retain heritage and connect communities and visitors.
• Utilising and keeping progress with technology as the Government, businesses and other stakeholders recognise that looking to advances in technology is necessary for planning and preparedness for the future as well as for efficiency.
These efforts contribute to the rejuvenation of various parts of Singapore, such as the Central Area (comprising city locations such as the Central Business District and the area surrounding Marina Bay), through incentives which encourage growth and evolution by allowing diverse uses such as residences, mixed-use neighbourhoods and lifestyle facilities. The aim is to facilitate and enable greater variety of options for living and working as well as choices for recreation. These make for interesting opportunities for a wide group of investors and businesses.
The Singapore Land Authority (“SLA”) has for several years been making land information available to the public, including an integrated online geospatial platform which provides up-to-date authoritative and detailed map information in 2D format. Just before the end of the last quarter of 2020, the Beta version of the 3D geospatial data was launched and is currently available on trial. Searches on title to properties have also been accessible online for many years and present efforts aim to augment the SLA’s on-going migration towards a fully electronic and paperless conveyancing process. This process promises features such as digital signing to facilitate secure e-conveyancing and smoother property transactions and allow residential property transactions to go fully digital. The purpose of this is to allow home-owners, purchasers, banks, financial institutions and the Central Provident Fund Board (the statutory body which administers our national compulsory savings and pension plan for working Singaporeans) to benefit from faster processing of property transactions and will help reduce time spent on paperwork and physical queues. These efforts will enable property transactions to be carried out seamlessly and will be particularly valuable in times of restrictions on movement, such as the circuit-breaker measures implemented in Singapore in April to May 2020 in response to the COVID-19 pandemic.
The COVID-19 pandemic has brought to the forefront the benefits of placemaking in connecting businesses and communities, with associations and networks in different areas helping one another and co-ordinating their efforts in campaigns and in the provision of services and resources. It has undoubtedly reinforced the need for technology in the real estate sector.
The growth of property companies and estate agencies' online platforms and services has accelerated and transformed overnight. The manner in which property sales and launches of private residential properties are conducted changed, with showrooms for launches of property sales (which traditionally cater to crowds) having to adapt to safe distancing and crowd limit measures such as viewing strictly by appointment. In some instances, physical showrooms have been abandoned in favour of virtual showrooms. Several sales have been made solely with virtual viewings, without the usual physical sight of the properties.
As Singapore's economy, including the real estate sector, faced an unprecedented storm caused by the COVID-19 pandemic in the beginning of 2020, the Singapore Government also implemented a slew of responsive measures to alleviate the impact of the COVID-19.
Legislation was passed at the beginning of the second quarter of 2020 to allow a moratorium on legal action taken in response to parties' inability to fulfil, or breaches of, contractual obligations for specified contracts (including leases or licences of non-residential properties), if such inability or breaches were caused by COVID-19. Temporary relief was also provided to qualifying small and medium enterprises ("SMEs"), in the form of a rental relief framework for tenants. This was particularly helpful for SMEs operating in the retail and food and beverage sectors.
In November 2020, the Singapore Government began to transition from the abovementioned temporary relief measures, with more legislative measures developed to respond to the evolving COVID-19 situation. New legislation was passed for a Re-Align Framework which allows eligible parties to specified contracts (such as leases or licences of non-residential properties) to renegotiate, for a short period of time. Should negotiations prove unsuccessful, the contracts will be deemed terminated subject to certain provisions for payments. In designing the Re-Align Framework, the Government partially adapted the concept of a right of renegotiation of contracts from some civil law jurisdictions into Singapore's common law stystem. This speaks for the potential for future developments in Singapore's legal landscape.
The impact of the legislative measures on contracts is not certain at this point of time. Depending on the perimeters to be set for qualifying tenants or licensees under new subsidiary legislation (which has not yet been passed), the Re-Align Framework may affect many landlords or licensors of non-residential properties.
The onset of the COVID-19 pandemic has given rise to changes in investments. As businesses had to implement remote working policies and employees kept away from offices, investments in the office sector have been slow in 2020. Nevertheless, there are investors who see the relevance of commercial real estate in providing areas for personal connectivity and creativity between employees, and certain businesses that require employees to be physically present in its offices may see the need for more space than previously anticipated so as to comply with safe-distancing measures. The interest in malls and shopping areas dwindled as the retail and food and beverage businesses were significantly affected by COVID-19, particularly during the circuit-breaker when offices and non-essential shops and services were closed. On the other hand, with greater use of the internet by the remote working population, the industrial and logistics sectors (including data centre businesses) reported positive performances. COVID-19 has accelerated the growth of e-commerce and financial technology and these areas are likely to continue to perform positively going forward.
The remote working policies have not only impacted perspectives towards commercial real estate but also housing in Singapore. With Singapore's land management and policy aim of providing general accessibility to home ownership, the majority of Singaporeans live in owned public housing apartments which have traditionally been sufficient as living spaces. However, the impact of repurposing home spaces into working spaces has been felt by residents of both public and private housing. Post-circuit-breaker, there has been a spike in purchases of residential property despite the economic outlook. For some, this was because of confidence in the ability of the Singapore economy to be revived in the medium to long term and the sustainability of land values in Singapore. For others, the need for more space such as separate rooms to allow for remote working may have been the final nudge towards such purchases.
Although much of 2020 has centred around the predominant concern of coping with the COVID-19 pandemic and its repercussions, in the later part of 2020, Singapore did see several large property entities transacted or merged. These include the successful completion of the merger of two S-REITs (forming the largest S-REIT and Asia-Pacific’s second largest REIT), sale and purchase of significant buildings, warehouses and data-centres as well as investments into funds and companies holding stakes in significant commercial buildings and some collective sales of mature residential developments. This has given a boost and positivity to the Singapore real estate market. With the reduction in the rate of development charge (a tax levied when planning permission is granted to allow the development of building projects that increase land value) in September 2020, coupled with the carrying over by the Government of eight land parcels (allowed for different uses) originally slated for sale in 2020 to the first half of 2021, as part of the Government Land Sales Programme, Singapore may see more transactions and investments in real estate in the coming year.