Finding luxury bargains; helping young couples
IT IS a good time to be a local first-time private home buyer with a budget of several million dollars. Some developers of upmarket condominiums are dangling discounts to lure home buyers.
Prices of top-selling new housing projects in the Core Central Region (CCR), such as The Atelier, Pullman Residences Newton, Leedon Green and Hyll on Holland, have slipped in April versus March.
A savvy buyer keen on a bargain may wish to focus on housing projects with unsold stock that are seeing Additional Buyer’s Stamp Duty (ABSD) deadlines looming, such as Klimt Cairnhill. Selling a unit cheaper may after all make better sense to a developer than paying ABSD on unsold stock.
A local condo buyer in the prime districts could also be helped by the recent hike in ABSD that sees foreigners having to pay 60 per cent ABSD on any home purchase. Foreign buyers, who have typically been active in the private non-landed homes segment in CCR, may vanish amid the hefty ABSD payable.
However, the demand for luxury condos here can be supported by the growth in the number of wealthy residents. Consultancy Knight Frank projects growth in the number of ultra-wealthy people in Singapore of nearly 18 per cent between 2022 and 2027.
Still, many local first-time buyers are likely not looking for upmarket condos in prime districts.
In The Level Ground, I wonder if more help should be given to young local couples who bust the income ceiling of S$14,000 per month to be eligible to buy a subsidised Build-To-Order flat from the Housing and Development Board (HDB).
Maybe Buyer’s Stamp Duty can be waived for young local first-timer couples who do not receive the CPF Housing Grant when buying an HDB resale home. Also, BSD can perhaps be waived for such couples when buying private homes of up to S$3 million.
Helping young local high-earners in their homeownership journeys supports marriage and parenthood, as well as helps anchor such persons to Singapore.
Globally, the news flow on real estate is mixed.
Commercial real estate prices in the United States (US) fell in the first quarter for the first time in more than a decade, according to Moody’s Analytics, heightening the risk of more financial stress in the banking industry.
In the US, Uber Technologies plans to give up about a third of the space at its San Francisco headquarters, adding to a wave of technology companies downsizing in the city.
Meanwhile, Deutsche Bank is seeking to cut office space by 40 per cent at its key Frankfurt base in Germany as a rising number of employees work from home.
The proportion of new homes sold off-plan in London, UK, dropped to 44 per cent in 2022, down from a peak of 71 per cent in 2016, according to broker Hamptons International. Investors are turning to higher-yielding regions elsewhere in the UK.
Nonetheless, there is appetite for real estate deals.
In Australia, Chinese buyers are once again snapping up property, further fuelling resurgent prices in everything from luxury homes to tiny student apartments.
Singapore’s GIC is partnering Brookfield India Real Estate Trust to buy two commercial real estate assets in India with an enterprise value of US$1.4 billion.
CapitaLand Ascendas Reit successfully closed a private placement, which was 3.1 times subscribed, that raised gross proceeds of S$500 million. Some of these proceeds will be used to fund the S$218 million proposed purchase of Seagate Singapore’s The Shugart - a high-specification research and development facility and business park property in One-north.
Perhaps, investor interest in Singapore-listed real estate investment trusts (S-Reits) is picking up. Many S-Reits delivered robust operating performance for Q1 2023, with stable occupancy rates and positive rental reversions. Also, analysts are optimistic over S-Reits, given the potential pause in interest rate hikes.
Prospects for hospitality trusts look particularly strong. Singapore’s international visitor arrivals jumped to 1.13 million in April, up from 1.02 million recorded in March, based on the latest figures from the Singapore Tourism Board. April’s visitor arrivals set a new post-pandemic record, with Indonesia being the top source of visitors to Singapore.
Nonetheless, higher interest rates could cast a pall over the valuation of S-Reits. The net asset value (NAV) of various trusts may come under pressure. And a falling NAV in turn can raise the leverage of the said S-Reit.
Meanwhile, DBS Research has nearly halved beleaguered Manulife US Reit’s target price but maintained a “buy” stance on the counter.
My colleague, Ben Paul, suggests Mirae Asset Global Investments, which appears to be moving ahead to take control of Manulife US Reit, consider injecting fresh equity into Manulife US Reit via a placement of new units priced at the trust’s current net asset value.
For those who are closely tracking the local private residential property market, look out to see how well the 99-year leasehold The Reserve Residences in District 21 by Far East Organization and Sino Land does at its upcoming launch. This is an integrated development with direct connectivity to Beauty World MRT station, that is developed by an established name. Are the stars aligned for a strong take-up?
The private homes market has been resilient in the face of higher interest rates, property cooling measures and economic uncertainty. Is there more upside or downside risk to private home prices? Or will prices flatline?
