Buyers Still Warm to Singapore's Luxury Property Market

One of Asia’s most vibrant property markets, Singapore, where luxury home prices have jumped an estimated 40 percent over the past year or so, is now coming to terms with a global slowdown.

Private yachts are berthed outside luxury homes and condominium apartments at Sentosa Cove in Singapore.
Bloomberg| Getty Images|
Private yachts are berthed outside luxury homes and condominium apartments at Sentosa Cove in Singapore.

While transaction volumes and price growth have slowed down, selective buyers, many from China and Indonesia, continue to snap up niche upmarket properties in tony areas like Sentosa Cove, a seaside enclave, and in luxury districts like Orchard Road.

Jasmine Png, a property agent who sells homes in Sentosa Cove, says while her phone isn’t exactly ringing off the hook these days, it hasn’t gone totally silent either. She was expecting a client from China, who was flying down to view a waterfront bungalow in Sentosa Cove, while another buyer from South Africa was also looking to buy a bungalow in this island resort.

Sentosa Cove is one of the few seafront residential districts of its kind in Asia. This exclusive, gated community features one of the region’s few deep-water marinas and expansive views of the South China Sea. Some residents don’t even need to moor their boat at the marina, as many houses overlook man-made waterways that offer individual berths for private boats, right off the back doorstep.

That unique appeal has drawn plenty of interest from foreigners, who make up half the buyers in Sentosa Cove, according to the Sentosa Development Corporation, the government agency that manages Sentosa Island. It’s also the only place in Singapore where foreigners can own land.

“In the past, I had a lot of people buying (a home in) Sentosa Cove for an investment. Now I see people who want to buy it for themselves, as a holiday home,” says Png, an associate director at OrangeTee, a Singapore-based real estate company.

Singapore’s property market soared after the global financial crisis in 2008, led by a boom in mass-market housing. This is the segment that has the furthest to fall, according to analysts, who say there will be an oversupply of new homes over the next two years. A little over 32,000 new units will be completed in 2013 and 2014, 85 percent more than the number of units slated for completion in 2011 and 2012, according to the Urban Redevelopment Authority. Most of the new apartments being constructed fall into the mass category, say analysts.

“(However), there is not that much new supply coming into the luxury segment,” says Lock Mun Yee, a property analyst at Singapore-based DBS Vickers. DBS expects overall Singapore property prices to fall 5 percent in 2012. “The price drop in the luxury segment will be less,” he adds.

Nicholas Mak, head of research at SLP International, a property consulting firm, says property prices will enter a period of single-digit quarterly growth over the next six months.

However, if Singapore enters a recession, prices could drop by around 15 percent, Mak predicts. While luxury property will not be spared, the drop may be less. “The high end segment did not grow as aggressively as the mass market, so the drop may not be as bad,” he adds.

A relative lack of supply of these high-end homes provides a floor to prices. Properties priced above S$2,000 (US $1,570) per square foot are broadly classified as luxury.

Singapore's Sentosa Cove
Bloomberg| Getty Images|
Singapore's Sentosa Cove

The development plan for Sentosa calls for a limited number of units. Once fully developed in 2014 Sentosa will have 1,766 condominium units and 394 bungalows, according to the Sentosa Development Corporation and no more new units will be added after that.

However, the pace of luxury home sales has slowed over the last four months, agents and analysts say. In Sentosa Cove, for example, only about a dozen sales took place over August and September.

The price movement was also mixed – but the trend was generally up. A few buyers managed to inch the per-square-foot price in their condo down from the last recorded sale – but the majority of people paid more. A 3,025 square-foot unit in a condominium called The Oceanfront, for example, was sold for S$2,605 per square foot at the end of September, up 18 percent over a similar unit sold in August, according SISV Realink, an industry database that tracks caveats filed with the URA.

Another bungalow on Cove Drive, facing the waterway, sold for S$17.9 million in September setting a new per-square-feet price benchmark of S$2,612 for the area, according to StreetSine, a research company that collates property transaction data from various sources in Singapore.

The price tag, of course, depends on the size and how good the the sea view is. One modern tropical villa that faces the sea is currently listed for S$28.8 million. This two-storied, 10,000 square-foot home features high ceilings and floor-to-glass walls that overlook a private swimming pool and the South China Sea. Many other larger bungalows that have better sea views cost close to S$40 million.

“People are still looking, but they’re being selective,” says Chua of DTZ. “In a slow market, prices of better-designed and well-located projects hold better.”

At the same time, demand from foreigners is not expected to abate in the near future. “We believe that foreign interest in Singapore (high-end) property will remain strong over the coming years as Asia continues to grow,” says Ng.

The Chinese, in particular, are buying homes in Singapore. In the first half of 2011, the Chinese formed the largest group of foreign buyers of private residential properties in Singapore, outstripping Indonesian buyers for the first time, according to the URA. That interest helped buoy the luxury sector.

Singapore is widely viewed by foreigners as a safe place to live and invest in. “It’s a nice place to study and live,” says a Chinese businessman, who bought a five-bedroom penthouse on Singapore’s East Coast last year for his wife and son, who studies at an international school, and another two-bedroom condominium unit this year in Sentosa Cove as an investment.

“We expect this to be a sustainable trend as wealth in China continues to build up,” says Png.