Is luxury property Eden the last of its kind?

The rich may demand more high-end units, but Swire's Singapore project was backed by holding power

Leslie Yee
Published Tue, Jul 13, 2021 · 05:50 AM


AMID the strong performance of the Singapore private residential property market this year, a deal that stood out was the purchase by the Tsai family of Taiwan, who are behind snack food giant Want Want China Holdings, of all 20 apartments in the freehold luxury residential project Eden, at 2 Draycott Park.

Developer Swire Properties of Hong Kong sold the units for S$293 million or around S$4,827 per square foot (psf).

Located at the corner of Draycott Park and Draycott Drive, the 22-storey development was completed in 2019. Each apartment is a four-bedroom unit of about 3,035 square feet (sq ft), which occupies an entire floor.

Is this transaction an anomaly? Does it provide useful pointers on the prospects of ultra luxury homes?

What stands out is not just the sale of all the units in a development to one party, but also that the developer held on to the units for some time post-completion.

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Residential developers here typically pursue good sales rates selling off-plan as construction gets under way so as to lower financing costs and drive higher return on equity, which is important as profit margins are generally thin.

Holding vacant completed units adds costs such as property taxes and maintenance expenses.

With Eden, Swire Properties would have incurred additional buyer's stamp duty charges on the land purchase price, and possibly, extension charges under the Qualifying Certificate rules for foreign housing developers in Singapore.

Perhaps being in little hurry to sell completed units at premier developments makes sense. Potential buyers get to see the finished product and hence, receive the assurance that top dollar is being paid for truly top quality.

In Hong Kong, Swire Properties took over three years post-completion to sell all twelve super luxury residential units of Opus Hong Kong, which is located at Stubbs Road in the Peak and is designed by Pritzker Prize winner Frank Gehry.

Swire Properties likely has strong holding power as it owns a large portfolio of investment properties and its gearing was 2.3 per cent as at end-2020.

As for the purchaser, Want Want's chairman, Tsai Eng Meng, bought one apartment while his son Shao Chung, who is an executive director of the company and a permanent resident here, bought 19 units.

There are probably few options available in the luxury home market here to house the over 60,000 sq ft of space that Eden offered.

A permanent resident may be able to get approval to buy a good class bungalow (GCB). Foreigners can buy villas in Sentosa Cove. The drawback with landed homes in Sentosa is that they sit on original land leases of 99 years as opposed to the freehold tenure of Eden and typical GCBs.

Whether with GCBs or landed homes in Sentosa, it is difficult to find a plot or combine several adjoining land parcels to house over 60,000 sq ft.

A rare exception is to buy the nearly 90,000 sq ft freehold GCB plot at 2 Lermit Road, near the Singapore Botanic Gardens, from Stamford Land executive chairman Ow Chio Kiat and his family for S$300 million or more.

Perhaps holding 20 separate strata titles for Eden is an advantage as this provides flexibility for one or more units to be transferred to other family members, leased out or sold if the situation warrants.

From an investment yield perspective, it is hard to justify Eden's pricing. If each unit is rented out at S$20,000 per month, gross yield is about 1.6 per cent per annum. On a net basis, the yield may be around 1 per cent, which is below the Singapore 10 year government bond yield or typical home mortgage rates.

But the price psf of Eden is below that of Park Nova, which is being developed by another Hong Kong group Shun Tak Holdings.

Sales at this 54-unit luxury condominium project at 18 Tomlinson Road started in May, with 12 units sold in that month for a median price of S$5,006 psf.

Such sales numbers must be put in a certain context. Singapore has been successful in attracting the super wealthy. More affluent families have flocked to Singapore as a base to park their wealth amid a global pandemic.

Data analysis firm Handshakes estimates that 221 single and multi-family offices opened in Singapore in 2020, which is up from 129 in 2019, and 22 in 2018.

Singapore's draw is a confluence of many factors, such as favourable tax rates, stability, rule of law, ease of doing business, quality education and high standards of healthcare.

This is against a backdrop of Asia's ascent and wealth creation in the region.

Forbes found a record 2,755 US dollar billionaires in 2021, nearly a third more than the 2,095 in 2020. Largely due to newcomers from China and India, the Asia Pacific region had 370 more billionaires, reaching a record 1,149 this year.

Based on a global wealth report by Credit Suisse, Asia Pacific had 57,318 ultra high net worth adults in 2020, representing slightly over a quarter of the global ultra high net worth adult population. The report forecasts that the number of such individuals in the Asia Pacific, with net worth exceeding US$50 million, will rise to nearly 99,000 in 2025.

Singapore remains open to foreigners choosing to grow their presence here. Through the Global Investor Programme, there is a path to permanent residency for qualified business owners or families if they invest S$2.5 million in a local business, certain funds or a family office with at least S$200 million in assets.

If more of the super rich emerge in Asia, and Singapore is attractive as a place to work, live, play and invest, monies will likely flow to super luxury condominiums in a few select addresses here.

Think well-conceived projects in super prime locations in a few streets such as Claymore Hill, Draycott Park, Ardmore Park, Nassim Road, Cuscaden Road, Tomlinson Road and Angullia Park.

Scarcity of such offerings can provide the basis for capital appreciation of ultra luxury apartments.

Early this year, CK Asset Holdings sold Asia's priciest apartment. A five-bedroom penthouse at the 21 Borrett Road project in Hong Kong's Mid-Levels, spanning 3,378 sq ft, sold for HK$459 million or HK$136,000 (S$23,650) psf.

Pricing psf of super luxury homes in Hong Kong that is a few times that of Eden or Park Nova is not unheard of. Relatively, Eden's pricing for a top address in a major business and wealth management hub looks a bargain for those who can afford it.

Singapore luxury home prices will rise so long as the super rich continue to grow in numbers and in wealth, especially in Asia, and some of these individuals park their money here. Activity in luxury apartments may get a boost when potential foreign purchasers can more freely travel here.

Developers seeking to cash in on the top-end of the market will need to focus on delivering global best-in-class products to meet the aspirations of clients who can afford to buy in any major global city.

What may impact the high-end home market would be measures to aggressively fight inequality such as imposing hefty wealth taxes on owners of luxury abodes.

The Tsai family would have needed plenty of savvy, guts and vision to build a successful food empire.

Likewise then, perhaps the Tsai family is ahead of the game in securing a luxurious residential project here. For such illustrious families, Eden is no ungodly investment.



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