The luxury market saw little transactions this year while developers are faced with a deadline to move unsold units.
Developers are feeling the heat from the property cooling measures in Singapore and are calling for the government to ease the Additional Buyers’ Stamp Duty (ABSD).
Just last February, the local real estate body, Real Estate Developers’ Association of Singapore (REDAS) repeated their calls for the abolishment of the ABSD that has impacted the luxury sector severely.
“Not many Singaporeans are buying into this segment, and prices have indeed come down substantially. The imposition of ABSD on this segment runs counter to the Government’s efforts to encourage foreign investment flows into the country, to activate the economy, grow investments and create jobs for Singaporeans,” REDAS President Augustine Tan was reported as saying in the media.
Indeed, Singapore appears to be losing its shine among foreigners as they now have to pay a 15 per cent ABSD while transaction volume has dropped significantly.
According to CIMB, foreign demand has fallen considerably.
Foreigners now make up less than 10 percent of new sales compared to 15 percent two years ago.
What defines the luxury market in Singapore?
Often defined as the prime areas of the Lion City, the luxury market includes Sentosa Cove, Orchard Road, Marina Bay, Newton, Tanglin and the CBD where condominiums are priced from S$2,500 upwards.
It also includes Good Class Bungalows (GCBs) and bungalows on Sentosa Cove where average prices are now around S$1,400 and S$1,600 per sq ft respectively.
There are altogether 39 GCB areas in Singapore that spans from Belmont Park to White House Park.
Typically, they are defined as houses with a minimum land plot size of 1,400 sq m and a building height of two-storeys only.
Planning guidelines also prevent high density developments in these areas giving it an air of exclusivity.
Primarily the address of choice for high net worth local and foreign investors, the high-end segment, however, has taken a beating as the property cooling measures take its bite.
Buyers’ market as transaction volumes dropped
According to the latest data from CBRE Singapore, a total of 136 caveats were lodged last year by the Urban Redevelopment Authority (URA).
This was a 44 per cent drop from the 243 caveats lodged in 2013.
The caveats tracked transactions involving luxurious condominiums priced from S$5 million onwards in the core central area of Singapore.
As transaction volume dropped, so did prices, indicating that it is a buyers’ market as sellers become more realistic and are willing to sell below their asking price.
For example, according to CBRE Singapore, the average price of luxury apartments in the resale market fell 6.7 per cent year-on-year from S$2,825 per sq ft as at the end of 2013 to S$2,650 per sq ft during the same time last year.
The GCB market also saw a further slowdown in the second half of 2014 with 13 caveats lodged compared to 15 recorded in the first half of last year.
Data from CBRE showed that there was an 8.2 per cent decline in investment quantum in 2014 at S$626.14 million compared to the S$681.98 million figures recorded in 2013.
The average price also saw a marginal decline in 2014 at S$22.36 million compared to the average price of S$23.52 million recorded in 2013.
While average prices are showing a decline, the average per sq ft however is still holding up, recording a 6.7 per cent increase from S$1,338 per sq ft in 2013 to $1,428 per sq ft in 2014.
Over on Sentosa Cove, only three transactions were recorded as foreign investors stayed away from the market.
Data from CBRE showed that there was a 20 per cent drop on the average transacted price recorded at S$1,676 per sq ft in 2014.
Developers under pressure
With some developers stuck with unsold units in the primary market, CBRE notes that they are “likely to adopt innovative sales schemes to cut prices to market these homes in 2015”.
Indeed, developers face a deadline to move unsold units, failing which they have to pay a levy, calculated at 8 per cent, 16 per cent and 24 per cent of the property purchase price for the first, second and third extra years respectively.
One case in mind is Goodwood Residences which CBRE said was sold at an average price of S$2,450 per sq ft.
It notes that “the developer sought to beat the deadline of June 2015 when it has to pay a premium to extend the sales period
During the peak of the market back in 2010, such properties in the exclusive Bukit Timah enclave could command prices of around S$3,000 per sq ft.
As more luxury units come on-stream this year, others may also follow suit to cut prices to move unsold units.
Seven luxury projects totaling 467 units that were completed in 2014 included Ardmore 3, Hana, Le Nouvel Ardmore, Nouvel 18, Sculptura Ardmore, Tomlinson Heights and TwentyOne Anguilla Park.
Moving forward, the luxury market will favour those with deep pockets as it will mean more choices for them as developers scramble to find such niche buyers.