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Luxury apartments in hot demand despite economic woes

Focus on capital preservation throughout the Covid-19 pandemic has driven many investors to divert their monies to real estate properties in property hot spots such as Singapore.

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Interior of an apartment at Wallich Residences. In the first nine months of this year, 2,182 non-landed private homes in the Core Central Region (CCR) were sold- a number that surpasses pre-pandemic periods such as 2014 and 2015, when 2,091 units and 1,654 units respectively were transacted for the full year.

WEALTHY investors are out in force this year although the global economy is teetering on the brink of a deep recession.

Well-heeled buyers have been on the prowl for value assets to grow their wealth, having snapped up luxury homes all over the world and sealing multi-million dollar deals in property hotspots such as Singapore, New York, Sydney, Shanghai and Seoul in recent months.

Perhaps the pandemic has provoked many buyers to reflect deeper on their long-term investment strategy. Currency fluctuation and sharp declines in global equities have ravaged the wealth of some people.

Thus, the focus on capital preservation has driven many investors to divert their monies to real estate properties, which are deemed to be a more stable and diversified source of return during times of uncertainty.

Sales of pricier homes have been booming in Singapore despite the pandemic. More than 2,000 luxury condominiums were sold in the first three quarters of this year.

At the top-end of the market, around 160 sales were made with price tags in excess of S$5 million, of which 33 transactions were above S$10 million.

The landed housing segment has similarly seen a steep rise in demand, with more than 1,000 landed properties transacted this year.

With interest rates at new cyclical lows, buyers flush with cash are certainly on the hunt for property deals as many are capitalising on the falling interest rates to lock in lower mortgage payments for future years.

The luxury market received another shot in the arm this year when governments and central banks around the world enacted sweeping fiscal programmes and massive stimulus packages to counter the disruptions caused by the Covid-19 pandemic.

The huge influx of capital from the tidal wave of quantitative easing (QE) unleashed by global economies is flowing overseas to offshore financial systems and real estate markets worldwide.

An increasing amount of incoming funds seem to be invested in Singapore properties, as the returns can be more attractive than other asset classes in the long term.

SALES SURPASSED PRE-PANDEMIC LEVELS

Deep-pocketed investors have been snapping up luxury condominiums here despite showflats being shuttered during a two-month "circuit breaker" period. Strict social distancing measures were implemented in April and May to combat the spread of the novel coronavirus in the community.

Realis data from the Urban Redevelopment Authority (URA) showed that 2,182 non-landed private homes in the Core Central Region (CCR) were sold in the first nine months of this year. This is 21.4 per cent higher than the 1,797 units transacted over the same period in 2019.

The number of luxury condominium transactions inked in Q1-Q3 2020 had also surpassed pre-pandemic periods such as 2014 and 2015, when 2,091 units and 1,654 units respecti vely were transacted for the full year.

Robust demand has been bolstering prices of luxury homes. The median price of non-landed private homes in the CCR rose 7.6 per cent year-on-year to S$2,288 per square foot (psf) in Q1-Q3 2020 from S$2,125 psf in Q1-Q3 2019. Prices surged 27.0 per cent this year compared to the same period five years ago.

For the first three quarters of 2020, there were 163 non-landed homes in the CCR transacted for S$5 million or more.

During that period, 33 super luxury apartments changed hands for more than S$10 million each. The most expensive unit in terms of price psf was an apartment at Wallich Residence that went for S$4,987 psf, or S$17.5 million. The 326-square-metre (sq m) unit on the 61st floor was transacted in January of this year.

The priciest luxury home sale in terms of price quantum was an 812 sq m sprawling apartment at Ardmore Park, sold for S$27.7 million in April this year.

This was followed by a 610 sq m unit at the Marina One Residences that was transacted for S$19.7 million in August, setting a new record price for the development.

SMALLER, 'MORE AFFORDABLE' CONDOS BOLSTERING SALES

At the other end of the pricing spectrum, there was an upswing in demand for less pricey luxury condominiums.

There was a proliferation of small luxury apartments being launched this year, which could have spurred buying demand for such units. Many developers introduced smaller, more affordable luxury homes during the pandemic to attract deal-seekers and expand their market share.

These units tend to appeal to buyers such as high-salaried young executives, retirees, budding businessmen, couples and young families.

In the first three quarters of this year, 756 or 74.9 per cent of the new luxury condominium transactions were smaller than 800 square feet (sq ft). In contrast, 263 and 204 of such units were sold in the first nine months of 2019 and 2018.

This year, developments with the highest number of small luxury condominium transactions were The M, Kopar at Newton, Fourth Avenue Residences, Pullman Residences Newton, Martin Modern, Leedon Green, and Midtown Bay.

Consequently, the number of new luxury condominiums sold for below S$2 million in the first three quarters rose from 124 units in 2018 to 215 units in 2019 and 731 units in 2020. In terms of proportion of total non-landed new home sales, 72.4 per cent were below S$2 million in the first nine months of 2020 - higher than the 44.0 per cent and 28.5 per cent inked over the same period in 2019 and in 2018.

Rising demand for small luxury condominiums indicate that many small-time investors were entering the market during the pandemic to snag a slice of the luxury property pie. Some may view the current crisis as an excellent opportunity to acquire a luxury home, since prices may rise after the pandemic.

NEW LUXURY HOTSPOTS

Traditional prime locations such as Districts 9 and 10 remained the most popular areas for luxury home deals this year.

For the first three quarters of 2020, the most popular luxury developments in District 9 were Kopar at Newton, 8 Saint Thomas, The Avenir and Martin Modern, and District 10 were Fourth Avenue Residences, Leedon Green, D'Leedon and Royal Green.

In addition, new luxury hotspots have emerged this year. The Marina Bay and the Bugis-Beach Road areas have been gaining popularity as a result of new projects being launched in those areas.

Marina One Residences in District 1 sold the most resale luxury condominiums in the first three quarters of this year, with 155 transactions inked at a median price of S$2,314 psf.

The M at District 7 moved 394 units at a median price of S$2,440 psf this year, while Midtown Bay at Beach Road sold 19 units at a median price of S$2,904 psf in the same period.

For the first nine months of 2020, a total of 423 non-landed homes in the CCR were sold in District 7. Comparatively, only 59 units were transacted over the same period in 2019 and 37 units in 2018.

This has also surpassed the full year sales from 2014-2019.

Similarly, the number of non-landed homes in the District 1 CCR rose from 122 units in Q1-Q3 2019 to 213 units in Q1-Q3 2020.

The Marina Bay and Bugis-Beach Road transformations attracted many investors to shell out top dollar for luxury homes. For Marina Bay, the continuous route along the waterfront - a route that links up the necklace of attractions along the Marina Centre, Collyer Quay and Bayfront - offers buyers both the panoramic views of the promenade and direct access to connecting malls at Suntec City and Marina Bay Sands.

Many foreign buyers, especially mainland Chinese, have picked up properties there as they view Districts 1 and 2 to be the next up-and-coming luxury home spot.

The Bugis, Ophir-Rochor corridor is also slated for a major transformation under the Urban Redevelopment Authority (URA) Masterplan. A mix of offices, hotels, residential and park facilities will be built in the next 10 to 15 years.

OUTLOOK

Singapore will continue to be in the global spotlight for luxury home offerings.

While the outlook for the global economy remains grim, we remain optimistic about the long-term prospects of Singapore's residential market. The fundamentals of our country - political stability, pro-business environment, safe-haven status, excellent healthcare, and robust legal system - have remained unchanged throughout the pandemic.

Consumer confidence is steadily returning as more sectors of our economy reopen. The gradual easing of travel restrictions may see more foreign buyers flocking to Singapore in the coming months.

We are still drawing investments from global tech companies, while more international students may study here due to the pandemic disruptions in the United States and Europe. The sustained appetite for investment assets among locals may continue to prop up the property market.

  • Christine Sun is head of research & consultancy and Timothy Eng is research analyst at OrangeTee & Tie Research & Consultancy

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