Luxury Homes H1 2019
External events weighed on market sentiments
A total of 17 deals within the Good Class Bungalow Areas were known to be closed in H1 2019, amidst a slowing economy due to geopolitical tensions, the US-China trade war, Brexit and the resultant uncertainties. A year ago, in H1 2018, when an air of optimism ruled the market, a similar number of 17 bungalows were sold. Thereafter, market sentiments were dampened by the introduction of higher additional buyer’s stamp duty (ABSD) in July 2018. Even so, the GCB market performed relatively well in H2 2018 with 25 GCB deals. Some of these deals could have been due to sellers lowering their price expectations to meet buyers’ offer.
Over at Sentosa Cove, the slowdown was similarly reflected with only three bungalow deals in H1 2019 compared to six in H1 2018. The total investment value of $63.50 mil in H1 2019 was 21% lower than the quantum in H1 2018. As bungalow prices in Sentosa Cove were still at the trough in H2 2018, astute buyers saw an opportunity to pick up fair value buys. This led to five bungalows being sold for a total value of $100.09 mil.
In the luxury apartments market, a total of 169 transactions were registered in H1 2019, significantly lower than the 234 transactions during the same period in 2018. This translated to an investment value of $1.387 bn, 26% lower than the $1.870 bn in H1 2018.
This segment of the market was clearly hit by the higher ABSD rates which came into effect in July 2018. In H2 2018, the transaction volume fell to 142 units with an investment quantum of $1,064.32 bn. Instead, H1 2019 performed better due mainly to the brisk sales at Boulevard 88 which helped to generate sales in existing luxury projects.
Good Class Bungalows (GCBs)
Of the 17 bungalow deals in H1 2019, two of the transactions crossed the threshold of $2,000 psf. One of them is located at Jervois Hill which was sold at $30.88 mil or $2,032 psf,the other is a newly completed bungalow at Belmont Road which was sold at $39.80 mil or $2,653 psf. The Belmont Road property comes fully furnished and has abasement which can fit 10 cars. Besides these two deals, we are aware that an Option-To-Purchase has been granted for another bungalow located at Leedon Park at $31.00 mil or $2,000 psf.
Back in H2 2018, the GCB market appeared to be very robust with 25 transactions, notwithstanding the cooling measures introduced in July 2018. The high investment quantum of $610.27 mil could be attributed to the sale of a few relatively large bungalow plots and new builds which were priced above $40 mil each.
Geopolitical tensions, the US-China trade war, Brexit and the resultant uncertainties are expected to persist in H2 2019. The Ministry of Trade and Industry has narrowed its GDP estimates for 2019 to come between 1.5% and 2.5%, slightly lower than the earlier forecast of 1.5% and 3.5%. Nevertheless, GCBs are unique properties, limited in supply and epitomises what those who can afford them actively seek. In particular, GCBs in well located areas will continue to be highly sought after. Buyers are currently cautiously optimistic and will make their purchase when the right bungalow comes along at the right price.
We expect the activity in the GCB market in H2 2019 to be similar to H1 2019, both in terms of sales volume and investment value.
Sentosa Cove Bungalows
Among the three bungalows sold in H1 2019 was the much-talked-about Copper House at Sentosa Cove which was finally sold in May after being in the market for nearly three years. Located along Cove Drive, it is a two-storey bungalow with a basement and boasts a 41-metre frontage facing the sea. It is also one of the rare sites in this enclave with a large land area of over 18,000 square feet. At the price of $32.00 mil, it reflects a unit rate of $1,773 psf.
The other two bungalows sold in H1 2019 had smaller land areas of less than 10,000 sq ft. They come with berthing facilities and face the waterway. The house at Cove Drive was sold at $17.00 mil or $1,948 psf while the one at Ocean Drive was sold at $14.5 mil or $1,467 psf.
Generally, the average price ($ psf) of bungalows at Sentosa Cove is higher than that of GCBs. This is because the bungalow plots have much smaller land areas.
Informed home buyers will know that prices are currently at very attractive levels. Moreover, the latest announcements by the government on the future development plans for the Greater Southern Waterfront, of which Sentosa island is a part, are likely to breathe new life into Sentosa Cove. As these initiatives unfold in the near future, they could lead to some price upside for the bungalows here.
While transactions had been slow in H1 2019 due to larger factors affecting the economy, there were signs that interest was returning to the bungalows at Sentosa Cove. It is possible for another three to five bungalow deals to take place in H2 2019.
A total of 169 caveats were lodged for luxury apartments up to 25 June. Although this is about 28% below the sales volume of 234 sales in H1 2018, it was higher than the 142 units sold in H2 2018.
The healthy showing of luxury market in H1 2019 could be attributed to the launch of Boulevard 88 in March. Located at Orchard Boulevard, the freehold twin 28-storey towers project comprises 154 units and moved 59 units in the four months. All the four penthouses in the project were sold at between $28.00 mil and $31.00 mil. At $31.00 mil, the largest unit achieved a remarkable unit rate of $5,125 psf.
Two other penthouses were also sold in H1 2019: a 7,395 sq ft unit in Corals At Keppel Bay was sold at $19.00 mil and a 3,918 sq ft unit in V On Shenton was sold at $10.80 mil.
In addition, two other penthouses were reportedly sold in H1 2019. An 11,098 sq ft super penthouse in Boulevard Vue was sold at $52.00 mil and a 6,555 sq ft penthouse in 3 Orchard By-The-Park was sold at $31.50 mil. The caveats for these two sales have yet to be lodged.
There seemed to be a rise in interest among ultra high-net-worth investors for trophy assets.
Profile of buyers
The increased interest in penthouses could be attributed to more high-net-worth investors looking for big units in quality developments. Some of these could be foreigners and permanent residents (PRs) who are ineligible to buy landed properties here.
Of the 169 luxury transactions in the Core Central Region (CCR), foreigners and PRs made up 70% of the buyers, compared to 66% and 61% in H2 2018 and H1 2018 respectively.
Chinese buyers continued to be the top group of foreign buyers, followed by Indonesians, Americans, Cambodians and Britons. Together, they accounted for 38% of the units bought by foreigners and PRs.
More new launches ahead
Some of the new luxury projects expected to be launched include Eden at Draycott Park (20 units), Cuscaden Reserve (192 units) at Cuscaden Road, 19 Nassim (93 units) at Nassim Hill and Nouvel 18 (156 units) at Anderson Road. Some of these projects may test the market with new benchmark prices.
Under the prevailing cautiously optimistic mood of the market, we expect the luxury sales volume in H2 2019 to remain at the current level as buyers continue to be selective in what they buy. There could be a modest price upside for projects at good locations with strong attributes.