So who are the latest investors in the high-end luxury property market in the city-state of Singapore? JP Morgan reports that Americans have become the second most frequent buyers in the second quarter of this year. Investors from China, Indonesia and Malaysia are usually the majority of buyers for luxury Singapore property.
In an interview with CNBC, property analyst Brandon Morgan of JP Morgan stated that compared to other major cities properties in the Singapore luxury property sector ‘are now cheap’. Since 2011 there has been a 15% to 25% decrease in luxury home prices leading to a prime opportunity market for high net worth investors, ‘Luxury housing in London, Hong Kong and New York was changing hands at prices as much as 165 percent higher than in Singapore.’ He also noted that funds from private equity and global property investors were making ‘block deals’ in purchasing multiple luxury apartments with some deals offering discounts.
Alexander Karolik Shlaen, an economist and CEO of Panache Management, recently stated that “Values in the market are a joke in comparison to some markets,” when compared to other markets like London. Freehold luxury property prices were averaging about $2000 per square foot which by London standards would not be considered a luxury price.
In 2011 as to counter the large increases in Singapore property prices, the Singapore government imposed the Additional Buyers Stamp Duty (ABSD) which would add almost 15% more for foreign buyers and Singaporeans with more than one property.
The result, those buyers not subjected to Singapore’s Additional Buyer’s Stamp Duty (ABSD) rule would also be motivated to buy. Fortunately for buyers from Lichtenstein, Switzerland and the United States are exempt from ABSD thanks to a tax treaty.
Overall Market Activity
In its October report on current Singapore property moves, Singapore Urban Redevelopment Authority (URA) published its flash estimates for the 3Q. The estimates track transaction prices in contracts for the stamp duty units sold up to 16 September of this year. One must remember however that flash estimates can vary as they are issued before final transaction contracts are compiled.
The latest update showed 1,609 uncompleted private residential units available for sale in 3Q of 2016. In the 2Q the private residential property index declined by 2.1 points from 14.0 in 2Q to 137.9 in the 3Q of 2016 or 1.5%.
Developers sold in the 3Q 2016 1,981 private residential units which was less than this time last year when 2,371 residential units were sold.
The report also disclosed that prices of ‘private residential properties decreased by 1.5% in 3rd quarter 2016, compared to the 0.4% decline in the previous quarter.’
The resale market showed 2,477 sales in the 3Q which was an increase from the 2Q at 2,140 units. Resales made up for 53.9% of all 3Q sales compared to the previous quarter of 47.0%.
There were 2,477 resale transactions in 3rd quarter 2016, compared to the 2,140 units transacted in the previous quarter. Resale transactions accounted for 53.9% of all sale transactions in 3rd quarter 2016, compared to 47.0% in the previous quarter units sold in the previous quarter.
URA reports that commercial prices of office space ‘decreased by 0.4% in 3rd quarter 2016, compared to the 1.5% decline in the previous quarter. Rentals of office space fell by 1.1% in 3rd quarter 2016, compared to the decline of 3.5% in the previous quarter…the amount of occupied office space decreased by 5,000 sq m (net) in 3rd quarter 2016, compared to the increase of 30,000 sq m (net) in the previous quarter.’
In the Singapore publication ‘Today’ Dr Chua Yang Liang, head of research at South-east Asia at JLL Property consultants says he expects housing prices to bottom out by 2018:
“(Singapore’s housing prices) are close to a trough with economic conditions steady and physical market conditions balancing … The gap between the prime and non-prime market has narrowed and when economic conditions improve, we should expect the high-end market to pick up,” said Dr Chua.
By Kevin Murphy: www.kevinmurphy.london