SINGAPORE — There has been no residential private property transaction attributable to family offices over the last six years, and therefore, they have had virtually no impact on Singapore's private housing market, said Minister of State for Trade and Industry, and Monetary Authority of Singapore (MAS) board member Alvin Tan in Parliament on Wednesday (10 May).
In fact, he noted, "purchases by foreigners have been relatively low, at about four per cent of all private residential property purchases on average over the last three years".
Tan was responding to questions by Non-Constituency Member of Parliament (NCMP) Leong Mun Wai and Sengkang GRC Member of Parliament Louis Chua. Leong had asked for the total inflow of foreign funds into Singapore through family offices and whether the government will provide an assessment on the impact of the inflow of such foreign funds on the city-state's official foreign reserves position, private property market and inflation. Chua had asked for the value of wealth inflows into Singapore on aggregate and as broken down by the top 10 source countries.
Overall, the inflow of foreign funds through family offices has "little to no impact" on Singapore’s Official Foreign Reserves and had "little to do" with inflation, said Minister of State for Trade and Industry Alvin Tan.
Singapore's asset management industry
While the MAS does not have comprehensive data on fund inflows into Singapore through family offices as such detailed data is "not necessary" for it to carry out its functions of ensuring macroeconomic and financial stability, Tan said that Single Family Offices (SFO) that apply for and are granted tax incentives by MAS managed about S$90 billion of assets as at 2021, based on MAS' annual asset management survey.
"This is less than two per cent of the S$5.4 trillion assets managed in Singapore as at 2021," said Tan.
Tan explained that the investor type closest to high-end individual investors in the MAS survey is under the category called "non-retail individual clients". This category includes family offices, clients of external asset managers, private trusts, and high-networth individuals.
Based on the MAS survey, Tan shared that the Assets Under Management (AUM) of foreign non-retail individual clients managed by financial institutions in Singapore increased by about S$470 billion from 2017 to 2021.
"This makes up about 20 per cent of the increase in total AUM by Singapore's asset management industry from 2017 to 2021," said Tan.
"In short, the bulk of the increase in AUM in Singapore is attributable to institutional investors. Non-retail individual clients account for a small proportion, and family offices even less," said Tan.
Impact on Singapore's official foreign reserves
Tan noted that while assets are managed in Singapore by entities based here, most of these assets are invested outside Singapore. This means that they typically remain in foreign currencies and have minimal effect on the Singapore Dollar exchange rate or official foreign reserves.
"If some of these inflows do get converted into Singapore Dollars, they would, just like all net capital flows into Singapore dollars, generate some appreciation pressure on the exchange rate. MAS addresses any such pressures, regardless of the source of funds, as part of its regular market operations to achieve its monetary policy objectives," said Tan.
He added that there were no unusual surges of capital into the Singapore dollar that have required a pronounced response on MAS' part and "certainly not from family offices", which would not form a significant portion of the total flow of funds for management out of Singapore.
Foreign inflows impact on inflation
Tan also said that inflation had "little to do with foreign fund inflows into Singapore, let alone the portion due to family offices".
"The step-up in core inflation since late-2021 was primarily due to sharp increases in global energy, imported food prices, and stronger domestic wage growth. These cost increases fed through to higher electricity and gas, food and essential services prices, accounting for nearly 75 per cent of MAS Core Inflation in 2022," explained Tan.
Tan said that Asia-Pacific was the top-sourced foreign region for the increase in Singapore's AUM for high-end individual investors from 2017 to 2021.
It accounted for "slightly over half" of AUM sourced from high-end individual investors. Asia-Pacific was followed by Europe and the Americas.