Demand for luxury property in Singapore is coming from a surprising source as purchases by Indonesian nationals has more than quadrupled up to $3.7 million. It may just be a coincidence but analysts at points to the recent tax amnesty in Jakarta—that seeks to bring home an estimated $300 billion in untaxed revenue—as having an effect.

The surge in property transactions at the higher end of the market comes in advance of the impending financial information sharing between Indonesia and Singapore. Across the world, there is a move towards tax harmonisation and collaboration but in this instance, only assets held in banks will be reported and real estate will remain undisclosed.

The value of 30 investment properties purchased by Indonesians since the start of the year is estimated to be more than IDR 48.3 billion a vast increase from the mere eight transactions recorded for the entire year in 2015.

However, it is not only Indonesians looking to shelter their assets that are making investments. The Singapore market is in a downtrend at the moment with opportunities in the city center where for instance the OUE Twin Peaks Towers is located.

While the rates of tax under Joko Widodo’s tax amnesty are competitive the result of not declaring is a hefty rate of 200 percent of the tax owed and this might be driving wealthy Indonesians to find alternative destinations for their property investments. The president had anticipated this backlash from foreign banks who he predicted would offer zero percent interest rates on loans and waivers on declaration fees. The president went on to urge Indonesians with untaxed assets abroad to start fresh and avail of the limited time only rates on offer, while at the same time boosting the economy of the country.

Indonesia has a significant budget shortfall at the moment and this boost to the exchequer will have long-term benefits for all its citizens. Despite this, legal activists have filed a request for a judicial review of the law citing that it protects money launderers and tax evaders. Widodo will do everything in his power to defend the tax amnesty law.

“Property has always been a safe haven for investors,” said Mart Polman, managing director of Lamudi Indonesia. “During times of economic and political uncertainty people turn the real estate to protect their wealth,” Polman added.

In short, as countries try to comply with the Organisation for Economic Co-operation and Development (OECD) by 2018 more information will be shared between countries and eventually even property will be part of the system. In many ways investors that seek to avoid taxes are taking a myopic approach to their investment portfolio; in some cases declaring now and availing of the best rates makes more sense. ***

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