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Thread: Luxury projects to dominate this year

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    Published January 14, 2010

    Luxury projects to dominate this year

    CBRE data shows over 40% of homes will be launched in core central region


    DEVELOPERS are expected to push out a slew of high-end and luxury projects in 2010 as buying momentum starts returning to these segments of the property market.

    Data from CB Richard Ellis (CBRE) shows that of the 7,975 landed and non-landed homes that are likely to be launched in 2010, more than 40 per cent of them are in Singapore's core central region (CCR), which includes the prime Districts 9 and 10, the financial district and Sentosa Cove.

    A total of 3,469 homes will be in the CCR. Another 3,071 units are in the outside central region, which is a proxy for suburban mass-market locations. The remaining 1,435 homes are in the mid-tier rest of central region.

    In contrast, most private home launches in 2009 were in the mass market.

    'The first half of 2010 will see a wider spread of project launches from mass market, to city fringe and to prime locations,' said Joseph Tan, CBRE's executive director of residential.

    'A lot of developers did not launch or re-launch their high-end and luxury projects last year as prices were down,' said Cushman & Wakefield Singapore managing director Donald Han.

    'They were holding onto their projects because they could afford to. Now, with prices beginning to climb, we can expect more launches in these segments.'

    According to Goldman Sachs, luxury homes prices here are still some 19 per cent below their 2007 peak, while prime and mass market home prices are 8 per cent and 4 per cent lower than their previous peaks respectively.

    However, it is unclear if the take-up for luxury homes will be as strong as that seen during the 2007 boom. Back then, sales were fuelled by international buyers. But now, most developers and analysts agreed that foreign demand has not returned as strongly as hoped to the high-end and luxury market.

    But sellers are still hopeful that the openings of the integrated resorts will once again kick-start more interest from international investors into Singapore.

    The fact that luxury prices are still far from their peaks means that investing in Singapore will once again prove to be attractive to international buyers, Mr Han added.

    Said UOB Kay Hian analyst Vikrant Pandey: 'The growing acceptance of Singapore as a choice destination to live and work will fuel prices further because property prices in Singapore are still significantly lower than those of key gateway cites of Monaco, London, New York, Hong Kong, Tokyo and Moscow.'

    There is also a lot of speculation on the ground about how developers will replenish their landbanks once they start selling luxury and high-end homes once again. In 2006 and 2007, a scramble for prime residential sites led to a booming collective sales market.

    'All developers we spoke to are looking to participate in the government land sales for 2010, as land banks have been run down in the strong buying momentum in 2009,' said Macquarie analysts Elaine Cheong and Soong Tuck Yin in a Jan 6 note.

    'A few have lost out in 2009 tenders due to intense competition. We see overpaying for land as a key risk for developers in 2010.'

    Some analysts believe that collective sales, which witnessed a slump in 2008 and 2009, with only one transaction compared to 116 in 2007, could stage a comeback in 2010 if the strong buying sentiment in the property market continues well into the year.

    'We expect en bloc sales to make a comeback on the back of: rapidly falling inventory levels among developers; the H1 2010 government land sales programme (which) mainly targets the mass-market segment; a recent surge in high-end transactions; moderation in price expectations by collective sale home owners; and the transformation of Singapore into a top global city with the opening of the integrated resorts,' said UOB Kay Hian's Mr Pandey.

    But Goldman Sachs said that the en bloc fever is not likely to return anytime soon.

    'Developers' demand concerns still trump the need to replenish land banks, suggesting a new wave of en-bloc sales is not yet in sight,' said analysts Paul Lian and Rishab Bengani yesterday.

    'As a group, developers made $2.5 billion in land purchases in 2009, flat over 2008, and some 75 per cent below 2006 peak levels, despite record take-up in 2009.'

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    Published January 14, 2010

    2010: The year of luxury homes

    5-10% rise seen in high-end residential prices; slight drop expected in the number of GCB transactions


    PRICES of luxury and high-end homes in Singapore started inching up in 2009, but analysts and developers here are confident that there is room for further growth.

    Developers here are unanimous in agreeing that mid to high-end residential prices will climb in 2010. And among property consultants, the expectation of price growth ranges from 5 to 10 per cent for the most part, although some are predicting increases of as high as 30 per cent.

    Data from Savills Singapore shows that the prices of high-end homes on the mainland in Districts 1, 9, 10 and 11 (which include Shenton Way, Orchard, Holland, Newton and Bukit Timah) have been climbing since Q2 2009.

    The average unit price of high-end homes fell from $1,621 per square foot (psf) in Q2 2008 to $1,174 in Q1 2009, the property firm said. But prices have since rebounded and the average unit price of high-end homes was $1,543 psf in Q4 2009.

    And they still have some way to go.

    'We are very positive on the luxury sector,' said Savills Singapore managing director Michael Ng. 'The segment is still a laggard (in terms of prices) compared to the mass and mid-range markets.'

    Echoed OCBC Investment Research analyst Foo Sze Ming: 'We reiterate our positive view on the high-end property segment as it is likely to benefit most from the opening of the two integrated resorts this year.'

    However, estimates for how much prices in this segment are expected to climb vary greatly, with predictions ranging from 5 per cent to 30 per cent.

    Over the last year, prices of mass and mid-range private homes have caught up with and even surpassed that seen during the previous peak. But for the high-end/luxury segment, prices are still some 25-30 per cent off their peaks, Savills' Mr Ng said.

    'We are confident that (high-end/ luxury) prices will move as much as 30 per cent over the next 12-24 months,' he added. 'We have already seen this happen in the mass market, over just the last nine months.'

    Other estimates are more modest. Goldman Sachs yesterday raised its forecasts for high-end property prices, and now expects high-end prices to rise 10-15 per cent. The bank's research shows that by segments, luxury home prices are 19 per cent below their 2007 peak, while prime and mass-market home prices are respectively 8 per cent and 4 per cent lower than their previous peaks.

    'We expect the high-end to lead for the better part of 2010; there is still positive carry in rental yields, as rents hold steady even as consensus braces for a 10 per cent decline,' said analysts Paul Lian and Rishab Bengani. And as the volume of total home sales falls, the high-end and luxury markets are expected to make up a larger piece of the pie.

    On a yearly basis, 2009 saw the second highest number of new private home sold. Developers sold around 14,500 new homes last year - second only to the record take-up of 14,811 units in 2007.

    But in spite of the high volume of new sales last year, caveats lodged show that the total value of the homes sold is only around 60 per cent of that in 2007. The lower quantum was attributed to the dominance of mass-market and mid-tier homes that were sold in 2009, compared to 2007 when high-end homes stole the limelight.

    This is expected to change in 2010. Analysts reckon that the take-up in 2010 will moderate to 8,000-10,000 units. But the activity is expected to move into the high-end and luxury segments. Mr Ng estimates that the volume of high-end and luxury home sales could climb by 50 per cent.

    The year began well last week, with property giant CapitaLand reporting that it has sold 60 apartments in the 165-unit Urban Suites condominium in the Cairnhill area, at prices ranging from $2,400 to $2,700 psf.

    In line with the rising interest in luxury homes, sales of good class bungalows (GCBs) also picked up in 2009.

    According to CB Richard Ellis, the average price on a psf basis reached a high of $826 last year, up from $820 in 2008 and $681 in 2007.

    And transaction volumes have also started picking up.

    Data from Savills Singapore shows that 74 GCBs worth a total of $1.3 billion changed hands in 2009. This was a up from 43 GCBs and $745.7 million in 2008.

    Most of the transactions last year took place in the second half of the year - 35 GCBs were sold in Q3 and another 15 were sold in Q4 2009.

    'A lot of people jumped into the GCB bandwagon from April last year,' said Savills Singapore's director of investment sales and prestige homes Steven Ming. 'People sidelined themselves from the GCB market in 2008 in anticipation of a further slowdown in the economy. So there was a backlog of demand.'

    Sales were also boosted by a low interest rate environment.

    For 2010, Mr Ming expects a slight drop in the number of GCB transactions, and estimates that 60-80 bungalows will be sold: 'We are expecting volumes to slow in 2010 because those investors who wanted to buy in the last two years would have bought last year.'

    As for prices, no big surges are expected either, with Mr Ming predicting at most a 5-10 per cent climb for the GCB market in 2010.

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    Jan 16, 2010

    Luxury home prices may hit 2007 high

    Property tycoon paints rosy outlook, plans new project

    By Joyce Teo

    IF PROPERTY tycoon Kwek Leng Beng is right on the money, then the prices of prime luxury homes could charge back to their dazzling 2007 highs by the end of this year or perhaps next year.

    This ultra-rosy outlook assumes the world economy continues to improve, the City Developments' executive chairman said during an interview in response to a question posed by The Straits Times.

    Of course, his forecast that high-end prices will rise is not new. Plenty of property consultants have been tipping a rise in the high-end sector this year.

    But the degree of optimism of an industry leader such as Mr Kwek could turn heads - and he insists he is not simply talking up the market for his own ends.

    'People say I like to talk up the market. It is not that I like to talk up the market. It is that more often than not, I would say I am 90 per cent correct in predicting the market,' he said.

    'This can only arise from my many years of experience, from the mistakes I learnt from, from the intuition that I have. I also understand the psychology of people.'

    In fact, he does not want to see prices rise too rapidly. 'I hope the increase will not be so dramatic as to provoke concerns,' Mr Kwek said.

    A return to the previous peak levels is possible by the end of this year, and if not, then by next year, he said.

    'My reading is that the rich Chinese buyers will come one day,' he said.

    The integrated resorts (IRs) will help to draw many foreigners here, and some of them may decide to buy a home here if they like the IRs, said Mr Kwek.

    Last year, it was the turn of mass market and mid-tier properties to rise - driven largely by demand from upgraders.

    In contrast, the high-end sector witnessed an exodus of all-important foreign buyers and has yet to get on track for a significant recovery despite some tentatively good signs.

    Mr Kwek feels luxury home prices can easily jump by more than 10 per cent this year as they are still about 25 per cent off the previous peak.

    The higher the market goes, the greater the number of buyers, he said. Conversely, when the market slips to a low point, many will not want to buy, he said.

    Mr Kwek's views were, to a certain extent, shared by Colliers International director of research and advisory Tay Huey Ying.

    She believes luxury home prices could reach or surpass the previous peak by the end of the year on an average basis.

    'Our basket of super high-end or luxury homes peaked at $3,174 per sq ft (psf) in late 2007 and early 2008. As of the end of last year, our prices were only 9 per cent off the peak,' she said.

    'However, this luxury segment is not likely to achieve another record price this year, given the expected modest growth in the global economy.'

    Indeed, there are still downside risks to reckon with, said Jones Lang LaSalle's head of research for South-east Asia, Dr Chua Yang Liang. For instance, the speed of economic recovery in the sluggish United States is uncertain, he said.

    The high-end market will not necessarily move as one, and some projects may outshine the rest.

    'Selective luxury projects with a good location and finishes may attempt to puncture the previous peak levels when our economy further improves in 2011,' said Dr Chua.

    Naturally, Mr Kwek hopes to be among those to stand out from the rest. He is preparing to introduce a new brand in possibly the next three months.

    He said he is still tying up loose ends on the 228-unit W Residences project on the Sentosa Quayside site, where a W Hotel will also be built.

    The residential part of the project could be priced from about $2,500 psf to $3,000 psf, and will be his second branded project here, after St Regis Residences.

    Other projects that his Hong Leong group and City Developments intend to push out soon include Cube 8 on Thomson Road and 76 Shenton on the former Ong Building site.

    [email protected]

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