Lavish Leap

Singapore´s Budget 2010 brought interesting news for the property sector – the progressive property tax for all owner-occupied residential properties. Under this structure, those who have properties with an Annual Value (AV) exceeding S$77,000 will see an increase in their property taxes; this equates to a mere 3 percent of private property owners or 0.4 percent of all property owners in Singapore. This, of course, pertains to those high-end property owners.

This move by the Government is definitely catered to reducing the pressure on mass market owners and get more out of those in the wealthy segment of society but perhaps it is also a positive indication that it has noticed the improving market sentiments, and especially on the high-end property sector?

Market Sentiment
Though the responses vary, market watchers as well as developers agree that the high-end market will see a healthy growth this year. Jones Lang LaSalle (JLL) stated that the market will progress due to improved market sentiment, better than expected improvement in regional economies, and foreign buyers returning to the Singapore market. The Intergrated Resorts (IRs) will also attract more investors.

Chua Chor Hoon, head of SEA Research, DTZ revealed: “There is more interest in the high-end property market. More foreigners are coming in to buy.”

Christopher Fossick, managing director, Singapore & SEA of Jones Lang LaSalle believes that there is space for growth given the fact that prices are nowhere near 2007 levels, which could lure investors into the luxury market.“Launches of 2009 of condominiums were very minimal so there was little opportunity to test the market. But coming towards 2010, we are likely to see more launches,” he says

Developers seem to have more optimistic outlook for the upcoming year. Kemmy Tan, director of International Real Estate, YTL Corporation says that the company feels positive for the year ahead: “The re overwhelming demand for Kasara villas during the pre-launch marks the strong return and renewed optimism of high net-worth investors and homeowners to the ultra luxury market in Singapore, particularly in Sentosa Cove,” she says.

Another developer, CapitaLand has several projects in the pipeline. Liew Mun Leong, president and ceo, CapitaLand Group: “We will continue to recognise income from residential sales and have a healthy pipeline of over 2,600 residential units.”

Gradual progress or giant leap?
In a fourth quarter results of 2009 (4Q2009) report released by research company Colliers, it cited that developers had launched 14,104 new private homes in 2009, surpassing the previous high of 14,016 units in 2007 by 0.6 percent. Over the same period, buyers picked up 14,725 units, just 0.6 percent shy of 2007’s peak levels of 14,811 units though it is important to note that the mass market dominated the primary market activity.

Though there is healthy market sentiment on the part of developers as well as investors, does that mean that luxury property will make a great leap to 2007 levels (be it prices or units sold) or is it a more gradual progress?

“In a macro high-end view, the recovery or rebound in the luxury end of the market is less so than in the mass market. What we saw in 2009, in the final three quarters is that activity picked up, particularly in the middle mass market that pushed up prices,” says Fossick. “But the recovery in the luxury end of the market was more muted, and did not come up to the levels as in 2007 and the ones that did go up were a bit more isolated.”

To take a further look into this topic, take a look at URA´s recently released January 2010 private residential property statistics. A total number of 1,476 units were sold in January 2010, which makes up about 80 percent of the 1,860 new homes sold in the entire fourth quarter of 2009.

According to data, the highest number of new homes that were sold were from the Core Central Region (CCR). RV Edge by developer Fortune Estates Pte Ltd sold the most number of units at 91 units. CapitaLand´s Urban Suites sold at a favourable number of 88 units (it has sold 126 units out of 140 thus far) while Parvis by Calne Ptd Ltd and Holland Residences by Allgreen Properties sold 73 and 67 apartments, respectively.

In the Rest of Central Region (RCR), a total of 350 new homes were sold – Cube 8 with 167 units,The Shore Residences with 144 units, and Siglap V with 50 units.
Some of the properties that had high median prices were Marina Bay Suites and Urban Suites at $2,506 per sq ft while the Marina Collection was at $2,500 per sq ft. Other developments in the RCR such as Alto and Concourse Skyline saw a median price of $2,011 per sq ft and $1,788 per sq ft, respectively.

Thus far, YTL Corporation has already sold at least 60 percent of villas in both the high-end developments in Sandy Island and Kasara – The Lake in Sentosa Cove, the latter having a steep asking price of $14 -$22 million for a villa.

Li Hiaw Ho, executive director, CBRE Research explains that though the improving market sentiment led to these figures, it could also be pent-up demand after three months of lower sales. “Following the Chinese New Year holidays, we expect developers to launch more projects such as The Vision, The Estuary and Sentosa Quayside. Demand should continue to remain buoyant, with the interest in high-end projects increasing steadily throughout 2010,” said Ho.

Also, DTZ´s report on 4Q09, noted that developers launched 14,103 new homes for sale in 2009, as active as they were in 2007 when they launched 14,016 new homes.

Such data proves that the luxury market has gotten a real good start to the year but whether it will hit the 2007 peak has yet to be seen. The amount of private housing units in the supply pipeline as at Q409 – 22,390 units and 17,390 units in CCR and RCR, respectively. With more than 130 apartments from the the coveted Marina Bay area and 900 units from Sentosa Cove yet to be out on sale, it is indicative of developers´ postive outlook.

Increase in Prices?

According to URA Q409 statistics, prices of non-landed properties in CCR increased
by 7.3 percent in the fourth quarter, and prices of non-landed properties in RCR increased by 9.5 percent. For the year 2009 as a whole, prices on landed properties increased by 7.7percent. However, the property price index (PPI) showed that at Q407, the CCR and RCR areas had a PPI of .3 and 156.6, while the PPI of Q409 was at 177.2 (CCR) and 153.7 (RCR). It denotes that prices have not reached the peak levels.

Fossick states whether prices of launches get nearer to 2007 levels can only be considered at the later part of the year and believes it to be a move at a moderate level.

DTZ´s Chua emphasises this view. “We can expect price increase to be more moderate this year, about 10 percent, compared to the initial run-up from the bottom last year. However, selected popular projects could see higher increase in prices,” she explains.

However, Raymond Chow, ceo/president, Ray International affirms that high-end property prices will only increase. He cites that Urban Suites is able to sell at a price of $2400 – $2,600. Though he does admit that the increase in prices depends on the location and quality of the project.

He states: “The developers are obviously always be more optimistic, they will generally raise their prices to sell. As long as it is not overrated they should be able to sell. We could give ourselves till mid-year, June or July, and do not be surprised if prices hit about $4,000. Grange Infinite hit about $3,300 per sq ft and the surrounding area prices is moving upwards.”

Rental Rates

URA statistics at Q42009 revealed that for the whole of 2009, rentals of non-landed properties in CCR and RCR decreased by 15.9 percent, 14.9 percent respectively.

Fossick of JLL says that rental growth can be expected to increase but cautions that lots of rents were being paid by the MNCs and now these businesses are controlling costs. “A creation in jobs and improved sentiment might push up rentals a bit but overall, the demand would remain steady or increase slightly that would allow some rental growth.”

JLL figures predict that there might be a muted rental growth at three precent y-o-y growth by end 2010. Some expected physical completion of about 7,300 units in 2010 may put downside pressure on any uptick in housing demand arising from improved economic condition.

Better than other markets?

The Weekend Today ran an article on 6 February, Singapore luxury home prices to lag behind those in HK. It revealed that Singapore´s luxury home prices will not match those in HK as the building ahead of two new casino projects will present nine times the number of new apartments over the next three years than in HK. According to the article, Goldman Sachs report stated that luxury property prices are about 19 percent below their 2007 peak. In 2007, prices went as high as $5, 265 per sq ft while a bungalow in Sentosa sold at $1,753 per sq ft (for 17,115 sq ft) last year.

JLL Q409 report reveals that Singapore is approximately 16 percent lower than its previous peak in 1Q08. It is still competitive as compared to other Asian cities as some have either surpassed or are reaching the previous peak soon. This includes Hong Kong, 0.4 percent away from its previous peak in 2Q08; Jakarta 0.7 percent away from its previous peak in 4Q08; Shanghai, 33.8 percent higher than its previous peak in 2Q05; and Kuala Lumpur, 0.2 percent higher than its previous peak in 4Q08.

Ray Chow expresses that Singapore´s high-end market will actually do better than Hong Kong, the latter known to have sky rocketing prices. “Although HK is expensive, it has its own market but in terms of Asia Pacific, I would dare to say that Singapore real estate market has been faring better. I rank HK and Thailand behind us. The Indonesia and Malaysia markets are slow; a unit in KLCC is not easy to sell depending on its location.” He expresses convenient travelling time in Singapore makes the country more appealing to many investors.

Says Chua of DTZ, “Compared to Hong Kong, prices in Singapore have not run up as much. Prices of high-end condominiums in KL are relatively cheaper at RM574 per sq ft compared to SGD2400 per sq ft for luxury condominiums in Singapore.”

Tan of YTL is optimistic and states that Sentosa Cove area makes the country a lucrative place to invest. “Sentosa Cove is a signature residential development that is recognised to play an integral role as part of this world-class luxury experience in here. Sentosa Cove’s prime location and waterfront living appeal immensely to affluent foreigners and local residents, thereby setting Singapore apart from other Asian countries.”

Upcoming projects to watch

The Holland Collection in Holland Road, Trillium near Grange Road, and Marina Collection by Lippo Realty. Ardmore 3 in Ardmore Park by Wheelock properties. Le Novel Ardmore, Ardmore Park by Wing Tai Properties. Seascape by Ho Bee Group. Sentosa Quayside and Shelford Suites by City Developments Limited (CDL). Westwood Development (launch date yet to be confirmed) by YTL Corp. The Interlace at Farrer Road; The Nassim (55 units to be released by mid year); Orchard Residences by CapitaLand. Grange Infinite by Grange Properties Ptd Ltd.

SOURCE: property-Report