Luxury condo launches hold steady

2 PROPERTY 2014
The Business Times, Thursday, March 13, 2014
Luxury condo launches hold steady
The market is not crushed, as a new wave of growth is expected in the next 12 to 24 months. By HAN HUAN MEI
THE volume of luxury transactions
have certainly taken a dip since the
last market peak in end-2007, except
for occasional spurts of sales in some
popular projects. While it is tempting
to conclude that the luxury market is
hard pressed, it is certainly not
crushed. CBRE is of the view that prices have in fact held firm and are
poised for the next wave of growth,
possibly in the next 12-24 months.
The positive outlook can be attributed
to a few factors.
Firstly, future supply in the prime
districts, particularly districts 9 and
10, is on the wane. Prime sites from
the collective sales market have effectively dried up in the past few years,
with around 800 units in the supply
pipeline currently. The number of luxury project launches have held steady
over the past few years, and that has
in turn stabilised prices. Should the
government relax or remove any existing cooling measures, the luxury market will probably be the first to catch
the wave as luxury prices are now at
relatively attractive levels.
Strong price growth
Investment-grade properties in the
luxury enclaves of districts 9 and 10
will always maintain a premium.
More than two decades ago, there
were only a handful of luxury developments. Thanks to the flurry of collective sales of older developments between the mid-1990s and mid-2000s,
several newer luxury condos have
sprouted in these areas since then.
Supported by strong growth and the
influx of high-net-worth foreigners,
average prices of new luxury homes
soared to $3,750 per square foot (psf)
in end-2007 from the previous peak
of $1,950 psf in 1996. Since the market’s recovery from the global financial crisis, luxury prices have been
hovering around $2,500-2,800 psf,
except for the super-luxury properties. Thus, the real estate industry
generally defines a luxury apartment
or condo as a trophy home located at
a certain prestigious address, offering
a generous living space of 1,800 sq ft
and above, and fetching prices starting from $2,500 psf.
Over the past 10 years, Singapore
has successfully established itself as a
regional financial hub. It also developed two integrated resorts at Marina
Bay and Sentosa to boost tourism, in
turn spawning luxury residential enclaves in these locations that have witnessed similar price growth as in districts 9 and 10.
Penthouses at Marina Bay Residences in Q4 2006 were sold at between $2,500 psf and $3,200 psf, on
a par with the freehold luxury homes
in the traditional prime districts at
that time.
In Sentosa Cove, the waterfrontcum-resort lifestyle homes and the liberalisation of ownership rules to allow foreigners to buy landed homes
saw prices of new condos rise from
around $1,500 psf in 2006 to above
$2,000 psf in mid-2007. Even
projects at Keppel Bay, on the mainland across Sentosa Island, benefited
from this uptick. The iconic Reflections At Keppel Bay was launched in
mid-2007, and its seafront units and
penthouses were sold at $2,500$2,700 psf.
Prospects for strong capital appreciation are good for integrated developments in the CBD and branded residences. Duo and Marina One are two
integrated projects that are jointly developed by Temasek Holdings and
Khazanah Nasional. Duo Residences
saw sales of about 600 of the 660
units in November 2013. Marina One
at Marina Bay will feature two 30storey office towers, 140,000 sq ft of
retail space and two 34-storey residential blocks housing 1,042 apartments. Tanjong Pagar Centre, above
the Tanjong Pagar MRT station, will
comprise offices, a retail mall, a luxury business hotel to be named Clermont Singapore and 181 luxury residences named Clermont Residence.
Fourteen units of Clermont Residences were sold at the project’s debut in
Q4 2013 at around $3,000 psf. In the
Stamford Road area, Eden Residences Capitol, the residential tower of another integrated project, saw 15 of
the project’s 39 units sold in 2013 at
around $3,000 psf. The project is a
restoration-cum-redevelopment
project of the former Capitol Building,
Capitol Theatre and Stamford House.
It will house a historical theatre, a premium shopping mall and a six-star hotel named The Patina, Capitol.
CBRE expects similar success for
South Beach at Beach Road, a blend
of four historic buildings with two
new towers to house office space, retail space, a designer hotel and 180
luxury residences.
Branded residences is another
class of luxury homes that has gained
prominence in recent years. They
stand out for their quality – the premium that they offer in terms of services, typically those which mirror
hotel-style living such as concierge,
valet and butler services which cater
to the specific needs of residents.
Branded residences are usually established global brands which leverage a
platform of services and therefore enjoy a high level of prestige.
Competitive market
Based on caveats lodged for luxury
units, we noticed that their volume
has fallen to around 50 units each in
2013 and 2012. As at end-December
2013, the median price for new luxury homes in Districts 9 and 10, Downtown Core and Sentosa Cove/Keppel
Bay stood at $2,800 psf, $3,100 psf
and $2,850 psf, respectively.
With effect from Jan 12, 2013, the
additional buyer’s stamp duty (ABSD)
for foreigners was raised from 10 per
cent to 15 per cent, and permanent
residents have to pay ABSD of 5 per
cent and 10 per cent for first and subsequent purchases respectively. From
June 29, 2013 onwards, the total
monthly debt repayment of a borrower will be capped at 60 per cent of his
gross monthly income. These measures posed hindrances on potential
buyers/investors. Caveats showed
that the demand for new luxury
homes fell from 104 units in 2011 to
54 units in 2012 and 42 units in
2013.
Secondly, developers who are
bound by Qualifying Certificates (QC)
conditions are under pressure to dispose of their units. The Residential
Property Act prescribes that a housing developer which includes any
shareholders or directors who are not
Singapore citizens will be bound by
Singapore’s luxe condo enclaves
TRADITIONAL LUXURY
ENCLAVES WITHIN 1 KM
RADIUS OF ORCHARD/
SCOTTS RD JUNCTION
Locations
Examples
of projects
EMERGING LUXURY
ENCLAVES
(WATERFRONT/
CITY-LIVING)
BRANDED
RESIDENCES
INTEGRATED
DEVELOPMENTS*
(WITHIN CBD)
Ardmore/Claymore
Angullia/Cuscaden
Grange/Paterson
Nassim
Marina Bay
Sentosa Cove
Keppel Bay
Ardmore Park
Draycott Eight
Four Seasons Park
TwentyOne Angullia Park
Skyline @ Orchard Boulevard
Nassim Park Residences
The Marq On Paterson Hill
Marina Bay Residences
St Regis Residences
Marina Bay Suites
The Ritz-Carlton Residences
Marina Collection
Singapore Cairnhill
Seven Palms Sentosa Cove The Residences At
Reflections At Keppel Bay W Singapore Sentosa Cove
Clermont Residence
The Orchard Residences
Duo Residences
Eden Residences Capitol
Clermont Residence
South Beach
Marina One
*For the purpose of this article, CBRE defines an integrated development as a mixed development located within the city which comprises at
least two uses – office, retail, residential, hotel – with the advantage of a direct link to or in close proximity to an MRT station.
QC conditions, the main ones being:
◆ Completion of development and obtaining Temporary Occupation Permit (TOP) within five years;and
◆ Sale of all the units in the development within two years of TOP. Developers who require more time to fulfil
the above conditions will have to pay
an extension charge.
As at end-2013, there were nearly
1,000 unsold units in several luxury
developments that had been completed since 2011. Although not all these
developments are bound by QC conditions, it is still in the interest of the developers to sell or lease them.
Whether to make any price cuts is
usually not as straightforward a decision as it seems. Moreover, it is difficult to make a judgement call on how
much discount to give in order to
bring about the desired level of sales.
For the most part, developers have
been able to hold on to current prices
for luxury projects but may be pressured to adjust prices to a competitive
level as more projects reach their TOP
dates.
Han Huan Mei is associate director
(research), CBRE
Source: CBRE Research
New luxury homes sales volume & price
2008: Global
Financial Crisis
UNITS
500
2013: ABSD 2
& TDSR
MEDIAN
PRICE
($PSF)
3,500
400
3,000
300
2,500
200
2,000
100
1,500
0
2006
2007
PD 9,10
$ psf (PD 9,10)
2008
2009
Marina Bay
$ psf (Marina Bay)
2010
2011
2012
2013
1,000
Sentosa Cove/Keppel Bay
$ psf (Sentosa Cove/Keppel Bay)
Note:
■ The above data is based on caveats lodged for non-landed homes with floor areas from
167 sq m (1,798 sq ft) and prices from $2,500 psf.
■ ABSD 2 refers to the revised additional buyer's stamp duty introduced in January 2013 whereby
foreigners have to pay 15% for every housing unit purchased, PRs have to pay 5% for the first and 10%
for subsequent unit purchased, locals will pay 7% for 2nd and 10% for subsequent unit purchased.
■ TDSR (total debt servicing ratio) framework was introduced in June 2013.
Source: URA, CBRE Research
The Business Times, Thursday, March 13, 2014
3

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