More price upside for luxury homes: Analysts

by Jo-Ann Huang Limin
05:55 AM Dec 17, 2010

SINGAPORE - More top-end condominiums in the core central region (CCR) have been changing hands - at higher prices - with each passing month. Yet, deals above $4,000 psf are still rare. Analysts say that this shows the luxury segment still has room for capital appreciation.

November saw only one such transaction - a Scotts Square unit which sold for $4,358 psf, according to the Urban Redevelopment Authority (URA). In October, a Boulevard Vue unit sold for $4,800 psf.

Back in 2007, a unit at Orchard Residences went for as high as $5,094 psf, while one at the Marque on Paterson Hill fetched $5,262 psf. In all, 13 units sold at higher than $4,000 psf in the second half of 2007. So far, in the second half of this year, there have been only five such sales.

Investors are still not paying top dollar for extra exclusivity - a sign that they have been cautious on luxury homes in the current property cycle. Prices of mass-market homes, meanwhile, have already surpassed their 2007 peaks.

Even then, analysts say it's only a matter of time before prices of luxury properties catch up with - and exceed - their 2007 peak.

"There's room to grow a further 5 to 8 per cent to reach 2007 price levels," said Dr Chua Yang Liang, head of research, South-east Asia at Jones Lang LaSalle.

Sales of new luxury homes have also been volatile, according to the URA's data. Sales in the CCR in November fell to 213 from 335 units in October. In September, following the government's Aug 30 measures to cool the property market, CCR sales were as low as 84 units.

But investors need not worry about the erratic sales volumes, analysts say.

"Luxury property sales tend to see some volatility because there are fewer luxury property developments compared with mass market ones," said Dr Chua. "High-end property developers launch their projects more sporadically."

With China clamping down hard on the property market in its tier-one cities, ultra-rich investors are likely to move capital to Singapore, analysts say.

"High-end residential properties in Singapore, which traditionally enjoy significant foreign home buying interest, may benefit as a number of investors from across the world are looking at diversifying their investments geographically," said Mr Ong Kah Seng, senior manager of research at Cushman & Wakefield.

Credit Suisse says investors should exit the residential real-estate market in China and move their money to the residential and commercial property markets in Singapore, Hong Kong and Japan.

The bank expects residential property prices in Singapore to increase 5 per cent in each of the next two years, on top of an estimated 15 per cent gain this year.

Still, analysts warn that the policy risk going into next year remains high for all types of properties, including luxury units that are typically unscathed by measures that seek to curb leveraged home-buying.

They said harsher cooling measures may be introduced - such as a tax on profits from property sales after URA data this week showed that 1,909 private residential units were sold last month,a surprising 80 per cent jump from October's 1,058 units.

Source: www.todayonline.com