Much has been said about the recovery of the Singapore residential market. With Singapore’s strong economic performance in 2017, market sentiments have improved and confidence is gradually returning to the residential market. In 2018, both residential demand as well as prices are expected to outperform the levels reached in 2017.
How High End Properties Help To Recover Real Estate Market?
Leading this recovery will be the high-end market, especially with the return of foreign demand for luxury properties. For non-landed property transactions in the Core Central Region (CCR) above $5 million in 2018, more than half of the buyers were foreigners and Singapore permanent residents. This is in contrast for transactions below $5 million where Singaporeans make up between 60 and 75 per cent. Generally, Singaporeans with budgets above $5 million would prefer to buy freehold landed homes, especially if they plan to live in them.
In the first quarter of 2018, the top five groups of foreigner who bought luxury properties in Singapore were the Chinese, Indonesians, Malaysians, Taiwanese and Britons. In terms of projects, the top five which attracted the most number of foreign buyers were New Futura, Gramercy Park, The Nassim, Hilltops and The Ritz-Carlton residences.
Luxury homes in Singapore are relatively more affordable than in cities like Hong Kong where two Mount Nicholson apartments at The Peak were sold together at a sum of USD 148.5 million; or in New York, where a Park Avenue penthouse with a floor area of 7,929 square feet sold for USD 60 million (or USD 7,577 psf).
In contrast, the USD45.75 million Sculptura Ardmore 10,300 square feet super penthouse’s rate of USD4,573 psf is probably the highest ever reached in Singapore, while the median price for luxury properties in Singapore has ranged between USD2,400 and USD2,650 psf. Therefore, from a global perspective, Singapore is still attractive to foreign investors.
The increasing demand for luxury homes from foreigners, especially from buyers from China, Malaysia and Indonesia, signal their confidence in the Singapore market. Even after factoring Additional Buyer’s Stamp Duty (ABSD), luxury homes in Singapore are still very attractive to foreigners.
From recent en bloc sales, we have also seen that developers have paid a high price for development sites in the Core Central Region (CCR). These translate to a likely launch price of S$2,500 to S$3,500 psf for the new projects to be built 12 to 18 months from now, depending on the market conditions. This may mean that luxury projects may reach S$4,000 psf, up from the S$3,000 psf – $3,500 psf currently.
This increase in demand from foreign buyers, coupled with developers’ appetite for sites in prime locations as shown by the 15 bids placed for the Holland Road site and the high proportion of en bloc sales in the CCR, are factors that will ensure that the outlook for prime residential property remains positive. Based on the first quarter of 2018, the luxury market in Singapore is expected to further improve for the rest of the year, which will have trickle down effect on the rest of the market.
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