‘YOLO’ mentality and foreign buying interest widen old-new property price gap

By
/ EdgeProp Singapore
|
July 26, 2019 7:00 AM SGT
As the political unrest in Hong Kong has taken a violent turn, there is growing unease among the wealthy. A side-effect has been an increase in enquiries and expressions of interest about buying residential property in Singapore from private bankers in Hong Kong, according to some property agents.
“It’s not just private bankers enquiring on behalf of their clients in Greater China including Hong Kong, but the private bankers themselves are house-hunting in Singapore too,” says Ken Low, managing partner of SRI, who recently met such a banker. “And it’s not just local Hongkongers, but expatriates living and working there, who are now exploring the possibility of diversifying their risks and parking some of their wealth in Singapore.”
Anecdotally, the high-net-worth individuals from Hong Kong have a shopping budget in the $4 million to $5 million range, notes Low, and are looking at completed projects in the Core Central Region, the likes of Wallich Residence at Tanjong Pagar Centre, Marina One Residences, 8 St Thomas and South Beach Residences. However, some are also shopping at new launches in the prime districts, for instance, Juniper Hill on Ewe Boon Road, The Hyde at Balmoral and Boulevard 88, as they are looking at “the prospect of capital appreciation”, he adds.
ADVERTISEMENT

50% jump in foreign buyers

While there is definitely an increase in interest from Hongkongers, it is still too early to tell whether this will translate into actual sales, says Bruce Lye, managing partner of SRI.
The Good Class Bungalow at Maryland Drive, completed in 2002, and sitting on a 999-year leasehold site of 19,171 sq ft, was sold for $25 million ($1,304 psf) in June (Photo Credit: SRI)
However, there was a significant jump of more than 50% in the number of foreign buyers in 2Q2019, notes Lee Sze Teck, head of research at Huttons Asia. Some of the projects that were popular with foreign buyers in the quarter were Boulevard 88, Marina One Residences, Park Colonial and The Tre Ver, he adds.
The additional buyer’s stamp duty (ABSD) is still “a hindrance” for investors, adds Lye, although those buying for owner occupation, especially the Chinese, are more likely to take the stamp duty in their stride and treat it as “a higher cost of transaction”.
As buyers today – both local and foreign – are purchasing for their own use, they are more willing to pay a premium for a new home. “It’s this YOLO [you only live once] mentality,” says Lye. “Today, people have only one bullet and as they are buying for their own use, they are willing to pay a premium for a quality product, and especially for millennials, if a project offers facilities and a lifestyle that are Instagram-worthy.”
ADVERTISEMENT

Higher land prices to blame

The gap between new and old projects has widened even further over the past year. For instance, the latest recorded transaction at The Edge on Cairnhill was for a 2,142 sq ft, four-bedroom unit that changed hands for $3.68 million ($1,718 psf) in May last year. The Edge on Cairnhill is a 46-unit, freehold condo completed in 2002.
The Edge on Cairnhill (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Lye reckons the transacted price psf for the unit at The Edge on Cairnhill is probably on a par with the land price in terms of psf per plot ratio (psf ppr) paid by the joint venture between Tiong Seng Holdings and Ocean Sky International for the neighbouring Cairnhill Heights. They had announced that they had purchased Cairnhill Heights en bloc for $72.6 million last year, lower than the original $80 million asking price. Low Keng Huat paid $2,311 psf ppr for Cairnhill Mansions on Cairnhill Road, and that has surpassed even the highest transacted price at The Edge on Cairnhill, which was $2,280 psf at the last peak in mid-2007.
Because of the higher land prices that developers paid for both en bloc and government land sites over the past two years, prices of new projects launched have risen. “That’s why even mass-market private condos are priced from $1,200 to $1,300 psf, while in the city fringe, 99-year leasehold projects are around $2,400 psf, and in the prime districts, freehold projects are priced from just below $3,000 psf, with many sold at prices upwards of $3,500 psf,” says Han Huan Mei, director of research at List Sotheby’s International Realty.
ADVERTISEMENT

Landed premium

Foreign interest in the prime districts has not been limited to high-end condos either. “A lot of enquiries and requests for viewings for bungalows are from foreigners, especially the Chinese,” says SRI’s Lye. “Many of these are not yet eligible to purchase as their citizenship application is still pending approval. So, any purchases will only materialise in the next few months.”
A newly completed and fully furnished Good Class Bungalow (GCB) on Belmont Road was sold for $39.8 million ($2,653 psf), according to a caveat lodged last month. At Leedon Park, a GCB completed in 2011 fetched $31 million ($2,000 psf), based on a caveat lodged on July 11.
Meanwhile, in June, a GCB at Queen Astrid Park changed hands for $23.6 million ($1,487 psf) and Lye brokered the sale of a GCB on Maryland Drive, built 17 years ago, for $25 million ($1,304 psf). In May, he also brokered the sale of an old GCB at Ridout Road for $25.68 million ($1,166 psf).
“The prices psf for relatively new GCBs are a lot higher – from $2,000 to $2,600 psf – compared to older ones which are in the $1,200 to $1,500 psf range,” observes Lye.
Although there is a high premium attached to a new GCB, some buyers are willing to pay it. “A lot of them do not want the hassle of redeveloping or retrofitting a property,” he says. “They want something new so that they don’t have to oversee the construction.”
This is not just confined to GCBs. Across the board in the landed property segment, there is a greater premium attached to a new house, adds Lye.