SINGAPORE (June 28): Singapore’s soaring housing prices are bucking a global slump but the trend is also turning rich overseas arrivals into an easy scapegoat for the city’s rising cost of living. If Asia’s safe haven wants to keep growing as a regional wealth hub, politicians will need to work harder to keep costs in check.

The island nation is facing pressure in two interlinked parts of the market. Prices of state housing, owned by some 90% of Singaporeans, jumped 10% last year on top of a double-digit price rise in the prior year. Many homeowners aspire to own slicker private condominiums however, and prices there are rising almost as fast.

The reasons for the squeeze are simple. Construction was delayed during the pandemic, more people are working from home, and there is unprecedented interest in Singapore as a place to live, work and invest as geopolitical tensions between the US and China increase. Like in most other places, inflation is also high, at 4.7%. It’s a pointy problem however for a country that traditionally has managed housing for the masses well.

Politicians are mindful of elections due to be held by 2025. In June, Prime Minister Lee Hsien Loong’s government said it would redevelop the city’s only horse racecourse for housing, including public homes. It notes some 40,000 public and private housing units are due to be completed this year, the highest level in five years. Singapore also hiked taxes on private second-home purchases.

The moves are meant to dampen demand from local and overseas investors. The government says buying by non-Singaporeans is low, about 4% of all private residential purchases on average over the last three years, but it has nonetheless doubled stamp duty for foreigners to 60%. Singapore now has the highest such levy in the world, per Savills.

It’s also turned the city’s successful bid to attract family offices into a headache; policymakers despair at the ongoing blame apportioned to these investors who Singapore hopes will funnel productive capital into local sectors and create jobs. The government insists they have hardly had any impact on housing demand. It says single-family offices with tax incentives managed about US$67 billion (RM312.4 billion) as at 2021, making up less than 2% of the total assets under management in the city.

Singapore needs to do more to change perceptions if they are not reality. Its leaders are elected by its citizens and that means the city’s ambition as a financial hub depends on keeping the public onside more than other centres like Dubai and Hong Kong. The stakes of keeping everyone happy are high.

Property purchases in Singapore by foreigners fell by 28% in the second quarter from the previous quarter, per preliminary data from real estate agency OrangeTee & Tie, after authorities doubled stamp duties to 60% in April and raised other levies.

The government has in recent months hiked taxes on high-end properties, tightened housing loan limits, and taken steps to moderate demand for public homes.

Buying by foreigners has been low, at about 4% of all private residential purchases on average over the last three years, the government clarified in May in a reply to a question in parliament on wealth inflows.