More luxury condos to cross S$4,000 psf

Luxury residential homes crossing the S$4,000 per square foot (psf) mark in Singapore’s prime Orchard Road area have been few and far between in recent years. However this could change given the recent spate of record-setting land sales and upcoming launches in the district.

Shun Tak Holdings (a Hong Kong-listed company) said on Wednesday that it has purchased two freehold redevelopment sites for a total of S$593.5 million in Orchard Boulevard and Nassim Road.

First was the S$375.5 million purchase of Park House at 21 Orchard Boulevard via a collective sale, which set a new national record of S$2,910 per square foot per plot ratio (psf ppr); and second was a S$218 million purchase of a plot at 14 and 14A Nassim Road, which works out to an estimated S$2,744 psf ppr, inclusive of development charge.

These exceeded the previous peak price of S$2,526 psf ppr that Hong Kong’s Swire Properties paid for the Hampton Court collective sale site at Draycott Park in January 2013.

Market experts are expecting a breakeven pricing of between S$3,760 and S$3,900 psf for the former Park House site and between S$3,570 and S$3,750 psf for the Nassim Road plot. This means future projects on these sites could cross the S$4,000 psf mark.

Based on caveats lodged so far this year, only four luxury home purchases – two in Le Nouvel Ardmore, and one each in Boulevard Vue and New Futura – have breached this S$4,000 psf mark.

Eighteen such transactions took place last year; the last luxury home transaction in Orchard Road above S$4,000 psf was recorded in April 2014.

Demand for prime homes in the Core Central Region (CCR) – comprising Districts 9, 10, 11, Downtown Core and Sentosa – has been rising in the last two years. Private home transactions in the CCR surged 66 per cent last year to 4,585 units, making up 18.3 per cent of the total transactions island-wide, based on data from the Urban Redevelopment Authority.

The collective sales fever has been spreading from the mass-market to the prime districts since mid-2017. A total of 26 collective sale sites have been sold in the prime districts 9, 10 and 11, and another five government land sale sites sold since 2017 in these districts have yet to be launched.

Excluding Park House, the median land rate of the collective sale sites sold was S$1,664 psf. The concern over new launches that could be priced at S$4,000 psf on average did not surface until the sale of Park House to Shun Tak.

But a condominium project that commands that kind of price comes with the branding of the developer and consumer confidence that the developer can deliver a certain quality to justify the price.

The fact that both sites acquired by Shun Tak can yield fewer than 100 units each probably gave the developer some confidence that it can sell the units to foreign buyers, particularly those from Hong Kong and China. The developer can also market the projects through luxury auction houses and private bankers.

Some consultants reckon that there is appetite for new luxury properties priced at above S$4,000 psf.

The sale of units at 120 Grange has been healthy, with many units transacted at above S$3,000 psf; some units at Gramercy Park and The Nassim have been sold at between S$3,300 and S$3,600 psf.

Assuming that the new project is well located, the S$4,000 psf price point may be supported in the current upmarket if a developer were to include a higher proportion of smaller units in their upcoming project.

As developers’ existing stock in the CCR continues to diminish and new supply of completed homes continues to be low, many projects in the CCR have raised prices of their unsold units.

The price of non-landed private homes in CCR has been rising while that of the cumulative launched-but-unsold units has been dipping in the past few months. Developers’ monthly sales of non-landed homes in CCR have held steady over the past few months.

The number of luxury condominium purchases in the S$5 million to S$10 million range rose 35 per cent to 166 caveats in the first five months this year, from 123 caveats in the same period last year. Similarly, the number of ultra-luxury condominium purchases above S$10 million surged 94 per cent to 33 in January-to-May period, from 17 caveats in the year-ago period.

For the whole of last year, the number of caveats lodged for luxury condos stood at 336, higher than the year ago’s 216. The corresponding figures for ultra-luxury condos in 2017 and 2016 were 46 and 35.

The proportion of foreigners buying non-landed new sales in CCR rose to 53 per cent in the first five months of this year, compared to 44 per cent in the same period last year.

Singaporeans made up 46 per cent of such buyers from January to May this year, down from 50 per cent in the same period last year. (The remaining purchases were by companies.)

Similar to the same period last year, mainland Chinese were the top buyers of CCR condos between January and May, followed by Malaysians and Indonesians.

These days, the breed of uber high net worth individuals are more discerning than those a decade ago, when easy money was available and global leverage was astronomically high.

They would not overpay simply on a whim and fancy. Thus if a S$4,000-plus psf product is deemed to be a value proposition, there will be demand from these new-age buyers. So there will be demand. It’s just that the net will have to be cast wider to include not only wealthy Asians, but also those from other continents.

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