S'pore holds price edge in high-end homes

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Published June 6, 2006

S'pore holds price edge in high-end homes
The market here is also seen to be less volatile than those in other major Asian capitals


By ARTHUR SIM


(SINGAPORE) Luxury housing in Singapore is still cheap, comparatively. Compared with cities like Hong Kong, that is.


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St Regis Residences in the exclusive Tanglin area may have raised eyebrows by establishing a new benchmark of $3,000 per square foot (psf) last week, but some savvy international investors find it a bargain.

There is no definitive comparison of highest prices for residential property worldwide, but a BT survey of international real estate websites shows that a unit in Singapore's top residential address is still as much as 80 per cent cheaper than some of the most sought-after apartments in major cities such as New York, London, Tokyo and Hong Kong.

At One Central Park in Manhattan, New York, the average price for a unit is around $4,000 psf with penthouses going for $5,660 psf.

In London, which has the most expensive office space in the world, The Knightsbridge is selling for about $4,400 psf.

A high-end condominium in trendy Aoyama, Tokyo, costs about $3,400 psf. This is after a decade of deflation.

According to Savills Singapore, the average price for high-end residential developments here is about $1,500 psf. In Hong Kong, it is $2,200 psf, while in London, it is about $3,100 psf.

Wallace Chu, head of research at Savills, notes that one-off luxury developments in Hong Kong can cost as much as $5,600 psf, explaining why even at an average price of $2,500-$2,600, the recent launch of St Regis Residences by City Developments Ltd (CDL) is drawing so much interest from international investors. So far, CDL says about 60 per cent of its buyers are foreigners.

Singapore's high-end market has only taken off recently after plunging around 40 per cent in the property crash 10 years ago, but Mr Chu notes that there could be more investment potential here. 'We are picking up from a slightly lower base,' he says.

Indeed, a recent Savills Hong Kong report shows that high-end rents increased by a moderate 1.5 per cent in the first quarter of 2006, whereas here, Mr Chu notes that high-end rents increased by about 2.4 per cent. The same report also projects prices of high-end projects in Hong Kong to rise by 5 per cent for the rest of the year. In Singapore, Mr Chu expects to see 'double-digit growth, of between 10-15 per cent'.

Quek Kwang Meng, managing director and head of real estate investments at Citigroup Private Bank, says: 'Singapore presents itself as an attractive investment destination for high net worth individuals, especially when it comes to the residential real estate sector.'

He adds: 'Singapore's real estate market also tends to be less volatile when compared to those of other Asian cities and would appeal to those looking for sustained long term capital appreciation.'

By Mr Quek's estimation, foreign capital contributes to about 20 per cent of the total net worth of transactions in the residential property market, with 30 per cent of this going into purchases of high end properties. 'And this is on an uptrend,' he adds.

Property developers here are likely to take CDL's cue then and try to target more international property investors. Knight Frank director (research and consultancy) Nicholas Mak believes that there could be as many as five upcoming 'luxury' developments pitched at the $2,000-psf-and-above market. Already, CDL has acquired a large redevelopment site on Grange Road. SC Global has also recently acquired a large site in Cairnhill, with Wheelock Properties and Wing Tai Group already having bagged potential luxury development sites earlier.

The 'challenge', however, is whether these developers will be able to create a project that is unique in terms of 'design and branding'. Ardmore Park was considered the height of luxury 10 years ago, but this niche market has now been redefined. And as Mr Mak notes, although major developers have been trying to target 'international investors' with varying success, 'St Regis Residences just happens to be better planned'. Mr Mak does caution against the euphoria accompanying the high-end market. 'Is there a limit to this group of people who can afford to buy these luxury apartments?' he wonders. There are no available data on who these buyers might be, but Mr Mak thinks a majority are Indonesians, although increasingly, he thinks more Westerners are also buying here.

Some may worry about the impact of high-end prices on the rest of the property market as analysts had expected the buoyant high-end sector to pull up prices of middle and mass market residential projects, making these less affordable. But this has not happened. 'People have been talking about St Regis Residences for over a year and mass market prices have remained the same. I think there will be minimal impact on the mass market,' he says.

'As long as there is support from foreign buyers, high-end prices can behave independently,' he adds.