Most evidence points to a slowing market for luxury homes in Singapore.
In Jones Lang LaSalle's latest report of the performance of luxury homes across nine markets, Singapore was the only country to register a quarter-on-quarter decline and year-on-year fall in capital value or home prices for the high-end residential segment.
The residential index revealed that luxurious home prices for the country fell by 0.3% for 2Q2013 compared to the previous quarter. This marks the third straight quarterly decline. The year-on-year slide is 2.1% from the same quarter in 2012.
According to the report, the downward trend is likely to spill over to the second half of 2013 by a further 3–5%.
The same lacklustre performance is observed in the rental rates for luxurious homes. Based on Savills Singapore's recent report, for the second quarter of this year, the average monthly rent dipped by 0.2% quarter-on-quarter to S$4.86 per sq ft per month, making this the eighth consecutive quarter that rentals have slipped. Falling rent rates are attributed to an oversupply of upmarket homes and wealthy tenants adopting a tighter accommodation budget. The sluggish level is expected to continue until the end of the year, but temporarily protected from further sharp decline by developers holding onto their unsold units.
The oversupply of high-end homes is made up of a significant portion of unsold units held by developers. However, developers are unable to release these white elephants into the market without incurring a hefty cost. Under the current slow market, selling them will involve a substantial discount; whereas leasing them out will incur costly Additional Buyer's Stamp Duty (ABSD) via asset sale to investment holding companies.
Based on caveats lodged with URA, homes priced S$5 million and above saw sale volumes for the first seven months of the year thinned to the lowest level since 2008. From January to July, only 183 units were moved, a shed below the 187 units over the same period in 2008.
In parallel, at S$2,489 per sq ft, median sale prices for these homes fell to levels seen only in 2009. In January to July 2009, after the global financial crisis, median sale price fell to S$2,126.50 per sq ft.
According to market experts, the overall poor performance for the upmarket residential segment stems from the cooling measures like the ABSD introduced in December 2011 and the shrinking housing allowance of expatriates sent to work here.
Amid the economy and property market uncertainty, people looking to buy a home for owner-occupation or investment should be ever more prudent; hence speak to a professional home loan specialist for some FREE advice in selecting the most suitable loan.
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