Rich Indonesians Snap Up Singaporean Flats

Driven by uncertainty over potential racial violence, and lured by opaque banking laws to keep out prying eyes, Singapore remains the favorite bolt-hole for Indonesia’s rich, who are buying up expensive new flats about as fast as they come onto the market.

Thomas Tan, director for residential marketing at Raffles Quay Asset Management, told local reporters earlier this week that 30 percent of the units that went on sale for the new 221 units of the 66-story Marina Bay Suites went to Indonesians. Of the 155-odd units sold so far, about half have been sold to foreigners including Malaysians and Mainland Chinese, although Indonesians represent the biggest percentage.

Indonesia “is one of our key markets, and we continue to see strong demand,” Tan told local media in Jakarta. In 2011, Indonesians bought 1,714 properties in Singapore, averaging between US$1 million and US$5 million in price. In total, Indonesians were estimated to have spent US$165 million on Singaporean property in 2011.

Singapore has always been a port in a storm for Indonesian tycoons and lesser satraps a step ahead of the law or sporadic ethnic hostility, usually directed at ethnic Chinese. There are estimated to be about 70,000 US dollar millionaires living in Singapore, with rich Indonesians comprising a significant share of them. As long ago as 2007, 18,000 Indonesians described as “rich” were living in the Lion City, worth a combined total of US$87 billion – more than Indonesia’s entire annual government budget. At the time it included 200 debtors who owed money to the state and who had been hiding there since the Asian Financial Crisis of 1998.

Among them were crooked Indonesian bankers who plundered more than US$13.5 billion from the Indonesian central bank's recapitalization funds to try to put 48 ailing banks back together and fled for the island republic. They moved most of the money across the strait, where Singapore’s banking laws are among the world’s most impregnable. Indonesia has made half-hearted attempts to get the bankers and the money back, to no avail.

In 2007 Bloomberg reported that while Asia's dollar millionaires increased overall by 8.2 percent that year, Singapore's ones rose by 22.4 percent in the same period despite the fact that its economy grew by only 7.5 percent. Members of the Burmese military are believed to have deposited nearly US$5 billion with Singaporean banks. Gu Kailai, the incarcerated wife of the disgraced Chongqing Mayor Bo Xilai's wife, also has a Singapore green card and sent her child to school there, according to a report on the Voice of America.

The Marina Bay Suites, to be completed next year, is part of the Marina Bay Financial Center property development in Singapore’s “new downtown,” Marina Bay. The S$4 billion (US$3.2 billion) property is built on 3.55 hectares of land featuring three office towers, an apartment tower and a retail area.

Tan told reporters that Raffles Quay is promoting the remaining four of its highest floors, which includes three penthouses.

“We have kept the top floors for the best buyers,” Tan said, repeating that he saw a positive response from Indonesia.

“We’ve sold two units over the weekend and have commitments for another two units,” he said. Buyers of Marina Bay Suites are willing to pay from 3.5 million Singapore dollars to 9.5 million Singapore dollars, Tan said, declining to say how much Indonesian clients paid.

Property consultant firm Savills, in its research on the Singaporean property market in February, said Indonesians were among the top foreign buyers in that country. The report said 79 percent of Indonesian buyers purchased properties priced above S$1 million, indicating preferences for higher-quality residential space.

“It may be because of Singapore’s close proximity to Indonesia, and investment in Singapore is considered clear and reliable. We currently have very low interest rates and the currency is stable, so it continues to attract investment,” Tan said.

Families are also buying properties as they send their children to school in Singapore, he added.

However, in terms of investment upside potential, Jones Lang LaSalle reported lackluster growth in Singapore last year. In a report earlier this year, the research group said that average prices in Singapore’s high-end residential market remained stable for the sixth consecutive quarter up to the last quarter last year.

That is counter to luxury residential markets in Jakarta, which have continued to grow. Prices of high-end residential space grew by 14 percent last year.

(With reporting from The Jakarta Globe)