http://www.theedgeproperty.com.sg/co...sidential-2016

High expectations for strong recovery in high-end residential in 2016

By Ong Kah Seng / R'ST Research, The Edge Property | October 11, 2015 9:00 AM MYT
Gone are the good old days of 2007, when high-end residential properties — generally those in Districts 9, 10, 11, 1 and 4 — saw keen interest from buyers even though prices were extremely high. In the past two years, prices of high-end properties fell about 10%. The price fall varied significantly among such properties because they have very different characteristics.

It seems high-end residential property prices are stabilising, though. According to URA statistics, non-landed properties in Core Central Region (CCR) fell only 0.6% q-o-q in 2Q2015 and 1.3% q-o-q in 3Q2015. Prices of non-landed properties in Outside Central Region (OCR) fell 1.1% q-o-q in 2Q2015 and 1.6% q-o-q in 3Q2015.

It is widely expected that after General Election 2015, if the cooling measures are lifted at least gradually in 2016, the high-end residential segment will be the first to recover — compared with suburban condominiums and city-fringe apartments, which are less differentiated. That was the case when high-end residential properties led the price recovery in the mid-2000s, after the SARs period.

If cooling measures were gradually lifted in 2016, a recovery for high-end property prices is definite, but a strong price recovery is unlikely. We should factor in key trends for high end home buying, which developed during the past few years when the high-end residential segment was in the doldrums. Some of these trends are not simply a result of weak property times. They are new mindsets formed for the buying, owning and selling of high-end residential properties — and are quite set to persist.

In the weak property environment, buyers and owners have formed a new perspective of high-end homes in Singapore. They have a new definition of such property in terms of how endearing it is. A high end property is a luxury item, and there is a psychology surrounding people’s decision to buy such items. Such psychology seems to have emerged more prominently in recent years. In addition, the local high-end residential market is unlike the mass-market condo segment. Demand for the latter is generally domestic, but the former faces competition from luxury properties in key cities worldwide. The underlying demand for high-end properties is more international than for suburban condos.



Opportunity buying versus buying high-end homes at steep prices

The first new trend to note is the profile of buyers of high-end residential properties in recent times. There may be a revival in sales activity of such properties, but the purchasers are generally opportunity buyers. They are mainly wealthy local and foreign buyers, but from savvy, cost-sensitive and practical backgrounds. They include home-grown business owners who built up their wealth from scratch through frugality and practicality, hence the decision to pick up luxury property recently at depressed prices. There are also affluent foreigners from developing countries who tend to favour practicality over frills. They are unlikely to pick a unit at high prices.

http://www.theedgeproperty.com.sg/co...sidential-2016