Singapore Soars

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Backed by an international marketing campaign, Sentosa Cove homes are nearly sold out—more than half of the buyers are foreigners—and are generating a little bit of buzz that is music to the ears of the city fathers. When Hong Kong housewife and property investor Betty Ling first saw advertisements for Sentosa Cove three years ago, her Singaporean friends warned her "only ghosts live there." But she says she chose to buy in Singapore instead of Bali or Phuket because, "It's an international city and you have all the infrastructure of city life. You can feel safe there. Bali and China are scary. You don't know whom to trust." Plus, she says, prices are relatively low, adding, "Where in Hong Kong can you moor your boat right outside your house?" Another Sentosa Cove owner is Rick Scanlon, a 37-year-old investment-fund manager who has lived with his family in Singapore since 1996. "Our lot is right on the water, sort of carved into the hillside," says Scanlon, an American expat. "It reminds me almost of living in Malibu."

Malibu? In some ways, what's happening in Singapore more closely resembles recent events in Macau, the former colonial enclave on the Chinese mainland that saw its property market and economy soar after the government in 2002 ended a longstanding gambling monopoly and touched off construction of a spate of new casinos, resorts and residential projects. Singapore's actions are having a similar effect. Development is booming and property prices have been soaring. Upscale home prices that averaged about $8,500 per sq m two years ago are expected to reach more than $21,300 per sq m this year. Developers are piling into the market. Beyond Sentosa, several new luxury residential projects have gone up around the city in the past year, and units are selling out at record prices within hours of going on the market. In one such project, St. Regis Residences, located in Singapore's shopping district, seven penthouses sold at an average price of $18 million; three-quarters of the buyers were from Europe, the U.S. and the Middle East. "Singapore has entered a new era in terms of costs," says Tay Huey Ying, Singapore research director for Colliers International property brokers. "The top tier—and its prices—are here to stay."

The commercial-property sector is also buoyant, especially around Marina Bay, the western shore of which is being promoted as Singapore's answer to Wall Street, but with sailing, waterskiing and dining on your doorstep. Eight new skyscrapers are in the works that would quadruple Singapore's supply of top-quality office space by 2010. Partnering with both local and foreign developers, government planners have applied every element of its newest mantra—"live, work, play"—to the area. "It's definitely [the government's] vision," says Martin, the general manager of Marina Bay Financial Centre. "But they've convinced the private sector to foot the bill."

In fact, the government effort to revamp Singapore goes beyond property development. After the 1997 Asian financial crisis, bureaucrats realized the city could no longer rely upon manufacturing to fuel its economy, and began setting policies designed to create higher-paying, white-collar jobs in specific sectors: biotechnology, education, and private banking and finance. Singapore aspires to be a regional or even global center in those areas by offering incentives to corporations such as tax breaks, reasonably priced premium office space and Singapore's corruption-free business climate.

The push appears to be contributing as much to recent economic growth as property. Since 2000, production of drugs and medical devices has quadrupled to $15 billion. World-class educational institutions such as INSEAD and Johns Hopkins University have established Singapore campuses. The city-state is becoming the largest hub for private banking outside Zurich. Assets held in the Singapore offices of private banks including UBS and Citigroup have been rising 20% annually since 2003. More than 100 hedge funds have relocated to the island, up from 20 in 2004, according to the Singapore Monetary Authority. The Boston Consulting Group reckons Singapore now has more millionaire households as a percentage of total households than any other Asian economy.