Plush and minus

Sales of posh condos down sharply, but scope for recovery is high: Experts

Published on Jun 21, 2014 2:35 AM

By Cheryl Ong


SALES of luxury condominiums tumbled drastically in the first half of the year after new property curbs deterred buyers, but experts say there is much scope for a recovery.

"Historically, the luxury market is more likely to be supported by foreign demand," said Mr Desmond Sim, research head at CBRE. "The enforcement of the Additional Buyer's Stamp Duty (ABSD) has turned away some of this foreign demand as well as local demand."

Only 53 condominiums costing more than $5 million have been sold this year, well down on the 165 sold in the same period a year ago, DTZ Research data shows.

The total value of such homes sold so far this year is $429.3 million, a whopping 73 per cent down from the $1.6 billion recorded last year, according to caveats lodged with the Urban Redevelopment Authority.

A total of 13 caveats for units at the 210-unit Goodwood Residence in Newton were lodged. These were sold for $5.5 million to $11.5 million - or a range of $1,980 per sq ft (psf) to $2,689 psf.

Outside the prime Districts 9, 10 and 11, two units at the 383-unit Silversea in Marine Parade made the list. They were sold for $8.8 million and $12 million, or from $2,462 psf to 2,766 psf.

The most expensive deal was also a pale shadow of what was achieved last year.

A 4,500 sq ft unit at Boulevard Vue in Cuscaden Walk went for $16.6 million - or $3,700 psf - in this half of the year while the priciest unit in the same period last year was a 7,700 sq ft penthouse in TwentyOne Angullia Park that sold for $43 million, or $5,560 psf.

One reason for the overall decline was the smaller number of projects launched in the city centre, experts said. Only 231 luxury units have gone on the market since January, compared with 793 in the same period a year ago, according to DTZ.

Just 26 new condos have been sold this year, down 51 per cent from the 53 a year ago.

The dip was even more significant for resale homes. Just 27 units have changed hands - down 76 per cent from 112 units in the same period.

Ms Lee Lay Keng, research head at DTZ, noted that owners of luxury units generally have stronger holding power.

Investors are also likely to buy new units as the cash required at the outset is lower, added Mr Sim.

The bulk of high-end condo sales this year have been for homes costing between $5 million and $8 million - making up 66 per cent of units sold - while those costing $8 million to $10 million accounted for 19 per cent.

Condos over $10 million came in next at 15 per cent - with just eight sold since the start of the year. This is a far cry from the 24 units sold in the first half of 2013, although 47 were sold in a more active second half of last year.

Foreign buyers, who have supported demand for luxury homes, have stayed away. They accounted for 26 per cent of transactions in the first half of this year, while Singaporeans and Permanent Residents accounted for 66 per cent.

The Chinese continued to make up the bulk of foreign buyers, with 14 luxury condos purchased in the first half of the year. They bought 36 such homes in the same period a year ago. Indonesians, who were not far behind the Chinese last year with 32 units, have bought only seven units this year.

"Already overseas buyers view the 15 per cent ABSD as a turn-off, and with ample choices of investible real estate available from Europe, North America and Australia, they would vote with their feet," noted Mr Alan Cheong, research head at Savills.

Analysts reckoned the likelihood of a price surge is higher for the luxury segment than for mass-market homes, though it may be tempting to conclude that demand has been crippled.

Developers of prime projects have resisted the move towards shrinking unit sizes to keep projects affordable, they said, and prices of homes in this segment have held firm as a result.

Moreover, the gap between the average price of a luxury condominium and a suburban one has narrowed from around $2,025 psf during the previous peak in the first quarter of 2008 to $1,540 per sq ft this quarter, DTZ data showed.

"This prime market looks set to benefit from a better growth prospect than that of an already inflated mass market," pointed out Mr Sim. "Upon any lifting or tweaking of the measures, we may expect to see a refocus on this segment."

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