Singapore is leading the growth in luxury home prices, along with Tokyo, said a research report by Knight Frank. Knight Frank, a leading real estate services company, added that the increase in luxury price homes here bucks the trend of falling falling prices of prime properties in other major cities.
Luxury home prices rose 11.5 percent in the first half of 2018.
“In Singapore, recovery is a consequence of rising foreign demand and high land bids by developers, which has fed through to new-build prices,” said Knight Frank international residential research head Kate Everett-Allen.
Noting the new property cooling measures implemented in Singapore recently for the residential market, Everett-Allen said, “Investors may rue the rise in property market regulations which, in many cases, will add to their bottom line in the form of purchase or disposal taxes.”
Luxury home prices in Tokyo rose 9.4 per cent. Knight Frank said the positive economic sentiment in the city, the relative value of the city compared to other cities like Singapore and Hong Kong, as well as investment ahead of the 2020 Olympics, have all contributed to the price increase. Beijing and Shanghai saw luxury home prices increase 7.3 per cent and 3.3 per cent respectively.
“China’s decision to pare back its housing subsidy programme will have an impact on mass market sales in smaller cities, but we expect luxury price growth in first-tier cities to persist,” said Everett-Allen.
The research report said that average luxury home prices across the 20 cities it tracks around the world fell 4.2 per cent from six per cent previously.
“With the cost of finance set to rise in a number of markets, more stringent cooling measures being imposed, and slower growth in China’s first-tier cities, lower price growth will characterise the overall results of the Index for some time to come,” added Everett-Allen.
An earlier research report by Cushman & Wakefield Inc said that Singapore’s luxury homes are likely to be hardest hit by the recent property cooling measures, with sales forecast to fall between 30 and 40 per cent in the next two quarters. Christine Li, a senior director and head of research for Singapore at Cushman & Wakefield Inc suggested that foreigners may hesitate with their purchase of luxury homes considering the 20 per cent stamp duties they would now be subjected to.
The Cushman & Wakefield report said that overseas buyers accounted for one-third of luxury homes deals closed in Singapore last year. “More foreign buyers have been eyeing Singapore’s luxury homes for the past year, but they may now take a back seat,” said Li.
Investment from foreign property buyers is expected to drive the property market prices to levels not seen in recent years, said DBS in a report released in March. It noted that transaction values are tracking above expectations in the first three months of 2018.
2017 saw the property market coming alive due to record-high bids for properties that were not seen since the property cooling measures of 2013. The March report said that a strong list of project launches from 1st Quarter 2018 will underpin the potential for volumes to head higher. It added that factors like the higher land cost, stronger economic growth, and higher housing demand, are all expected to drive prices higher this year.
Singapore’s strategic location and its vibrant economy were strong pull factors for foreign buyers as there are no restriction on foreign purchase. Low annual interest rates for loans and an active resale market are other reasons why foreigners continue to invest in luxury homes here. The report also noted that demand by foreign property buyers for Singapore properties is back and that strong take-up is expected in the upcoming new launches.
Buyers from China especially have positioned themselves as the top foreign property buyers and investor group in Singapore over the past five years. While Malaysians and Indonesians came in at second and third place respectively. Properties located in the north-east and central regions of Singapore saw the highest level of demand last year from foreigners and Singapore permanent residents.
Only 5.6 per cent of the total number of transactions in Singapore last year were concluded by foreign property buyers versus a long-term 18-year average of 8.7 per cent. But with Singapore joining other big cities in countries (and jurisdictions) like Taiwan, Hong Kong, Canada and Australia in increasing their transaction costs for foreigners looking to acquire property, it is unclear of the luxury home prices here will continue increasing from the 2nd half of 2018.
The recent hike of the Additional Buyer’s Stamp Duty (ABSD) from 15 to 20 per cent on foreign property seekers and from 15 per cent to 25 per cent on entity buyers, the luxury homes market will certainly feel the brunt of the Government’s property cooling measures as it is highly dependent on demand by foreigners.
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