Published July 10, 2007

Local buyers baulk at prices that's over $3,000 psf

But well heeled foreign investors may continue to set new benchmarks


SOME high-net-worth individuals from places as varied as Indonesia, Thailand and Russia who need to park money in Singapore may not bat an eyelid about paying record prices for condos, but resistance seems to be setting in from local investors for properties priced at more than $3,000 per square foot, according to some market watchers.

Will this clip developers' ability to constantly keep jacking up prices of new projects? Or will the Singapore luxury market evolve to a new plane, as Singapore becomes increasingly attractive as a global city, where buyers at luxury residential property launches will be predominantly foreigners?

Some foreign buyers may be more amenable to paying top prices if they find Singapore still offers them an attractive proposition.

Of late, 60 per cent of the buyers for most new high-end projects have been foreigners, but sometimes the figure is even higher. At City Developments' Cliveden at Grange Road, 90 per cent of the 38 units sold so far have gone to foreign buyers, with an average price of $3,600 per square foot.

Some industry players say there is resistance from local buyers to anything costing above $3,000 psf, although one major developer has put the resistance band higher, at $3,300 to $3,600 psf.

Despite prices of $4,635 psf for a unit at St Regis Residences and $5,100 psf for another at The Marq On Paterson Hill, 'buying at prices above $3,000 psf is still pretty selective at this point in time', reckons DTZ Debenham Tie Leung executive director Ong Choon Fah.

Just how many units developers have been selling, and for how much, will emerge soon when the Urban Redevelopment Authority (URA) publishes more pricing details of units sold by developers.

The URA is expected to aggregate the number of units sold by developers each month, for each project, within certain dollar-per-square-foot price ranges, as well as the average dollar psf price posted each month for each project.

This source of information, where developers report sales prices achieved directly to the URA, will provide the market with more timely information instead of having to rely on caveats, which take time to be lodged.

And then there are also buyers who have not been lodging caveats, perhaps because they intend to flip the units for a quick profit.

Lamenting the current dearth of detailed price information on prices actually achieved for launches, Colliers International director (research and consultancy) Tay Huey Ying says: 'For most projects launched since the beginning of the year, generally only an estimated 40 to 70 per cent of the total number of units reportedly sold in each project have lodged caveats thus far. Hence, sales information that is available via caveats lodged is incomplete at this point in time.

'Improving provision or publication of more timely and complete information on sale progress and their transactional prices will go a long way in improving market efficiency. Would-be home-buyers will be able to make more informed purchase decisions.'

Going by caveats lodged for primary market sales between Jan1 and June19 this year, units sold by developers in high-profile projects like Orchard Residences, St Regis Residences and Beaufort @ Nassim at prices above $3,000 psf formed the minority of transactions for the respective projects.

Sixteen of the 48 caveats lodged during the period for Orchard Residences were for prices above $3,000 psf.

For St Regis Residences, the figure was five of the 39 caveats lodged, while for Beaufort @ Nassim, the share of caveats for developer sales at prices of above $3,000 psf was four out of 13.

Of course, a different picture may well emerge when the URA's data is released.

But whether the resistance is $3,000 psf, or at the $3,300 to $3,600 psf level, the resistance being shown by local investors is very real, say industry players.

'As prices go higher, potential buyers have more and more alternatives, and may want to diversify risk, to even beyond Singapore,' Mrs Ong of DTZ reckons.

'For such investors, chances are it will not be their first or even second property. If they pay $3,000 psf for, say, a 2,000 sq ft condo, the price comes up to $6 million. For this sort of sum, they will ask: 'Where else can I put my money? A small bungalow in Singapore, a top-end condo in Malaysia, Bangkok or even Sydney?'

CB Richard Ellis executive director (residential) Joseph Tan says that from his experience, for the price of condo units costing 'anything more than $8-10 million, which could work out to say $3,500 to $4,000 psf, local buyers have the option to look at freehold landed properties in prime locations'.

However, Mrs Ong says these would not be the sort of considerations going through the minds of wealthy foreign investors who may just want to park some money in Singapore real estate to diversify their portfolio.

Mr Tan says: 'They peg local property prices to those in major financial cities. For instance, average prices of luxury homes in London are about two-and-a-half times those in Singapore. So Singapore prices still look attractive to these global investors.'

Whereas foreign buyers have accounted for no more than 60 per cent of buyers in new high-end condo launches in the past, Mr Tan believes this figure can increase further.

But some market watchers reckon developers counting on just foreigners to set benchmark prices for their projects may not necessarily find the sailing smooth.

'Some foreigners prefer to buy projects that are well supported by local investors for added assurance, since local investors would generally be considered to know their market best,' Mrs Ong reasons.

But whether developers rely predominantly on foreign investors, or a mix of Singaporean and overseas buyers, developers may still be able to achieve higher prices for luxury housing projects here, if they can offer compelling propositions on design, lifestyle and the like, market watchers reckon.

While $3,300-3,600 psf appears to be a resistance of sorts among local investors currently, the level may move higher, depending on economic growth and supply-demand dynamics, Mrs Ong adds. 'Just last year, there was resistance at the $2,000 psf level,' she recalls.

Mr Tan says: 'If Singapore continues to be attractive to foreigners and our prices look appealing to them, it is likely developers will continue to bid aggressively for prime sites.'