The new normal in Singapore’s prime condo market
By EdgeProp Singapore
/ EdgeProp Singapore |
Foreign home purchases in Singapore fell in 2Q2023 after the new cooling measures were implemented in April (Photo: Samuel Isaac Chua/EdgeProp Singapore)
In the wake of the property cooling measures at the end of April, Steve Tay, who founded his eponymous real estate agency in early July, saw a sharp decline in enquiries from foreigners looking to purchase homes in Singapore.
Foreign buyers are now hit with a 60% additional buyer’s stamp duty (ABSD) on all residential property purchases, double the rate from 30% before. “Many are taking a backseat and evaluating their options,” says the executive director of Steve Tay Real Estate (STRE), which focuses on luxury homes.
When the ABSD for foreigners was raised to 30% in December 2021, “we could still convince foreign buyers that Singapore is a stable investment destination, because Australia, Canada, Hong Kong and the UK had also raised taxes on foreign home buyers by a similar quantum,” says Desmond Sim, CEO of Edmund Tie.
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“But at 60% ABSD, it’s a clear sign that the government doesn’t just want foreign capital to enter Singapore,” adds Sim. “They want foreigners to grow roots here and contribute more towards Singapore’s economy beyond just injection of capital.”
US citizens top foreign buyers
Not surprisingly, foreign home purchases in Singapore fell in 2Q2023 after the cooling measures were implemented in April, says Christine Sun, senior vice president of research & analytics at OrangeTee & Tie, in her July 19 report. “Prices of private residential homes have also shown signs of moderation and stabilisation as more housing supply comes onstream.”
US citizens emerged as the top foreign buyers in Singapore, having purchased the most condos in 2Q2023. They have displaced Chinese nationals who took the top spot in 1Q2023 and for six consecutive years from 2017 to 2022, according to OrangeTee & Tie.
US citizens and the citizens and permanent residents (PRs) of Iceland, Liechtenstein, Norway and Switzerland are exempted from the 60% ABSD as these five countries have a free trade agreement (FTA) with Singapore that grants their citizens similar tax treatment as Singaporeans.
The proportion of new non-landed private home sales to foreigners (non-PRs) slid to 1.6% in July, a level not seen since May 1998 during the Asian Financial Crisis. PropNex head of research & content Wong Siew Ying attributes this record low representation to “the punitive hike in ABSD” in late April.
Demand in luxury market ‘has dried up’
When foreigners drove housing demand in the Core Central Region (CCR), four-bedroom units of at least 2,000 sq ft were typically the most sought-after. Penthouses and large apartments in the prime districts commanded the highest premiums on a psf basis, with demand fuelled mainly by Chinese buyers.
“Demand in that sub-segment has dried up,” says Alan Cheong, executive director of research & consultancy at Savills Singapore.
Bucking the trend was the super luxury condo Les Maisons Nassim by Hong Kong-listed Shun Tak Holdings in prime District 10 of the CCR. It accounted for four out of the top five non-landed luxury home transactions in 1H2023, with transactions ranging from $30 million to $45 million, says Edmund Tie in its 1H2023 Prestige Homes report released on Aug 16. It worked out to an equivalent of $5,050– 5,727 psf.
With two of its remaining units sold in June this year, the 14-unit Les Maisons Nassim is now fully sold. These last two units are likely to have been purchased by the same buyer, a foreigner-turned-Singapore PR, as the units are on the first and second levels of the same stack, with the options both issued on June 27, based on URA data. The 6,179 sq ft, second-floor unit was sold for $32.75 million ($5,300 psf), while the first-floor unit went for $30.76 million ($5,050 psf), based on caveats lodged, bringing the total to $63.51 million.
The already subdued luxury residential was shaken on Aug 16 when the Singapore Police Force announced that 10 people were arrested on suspicions of forgery, money laundering and resistance to lawful apprehension. The police raided multiple locations on Aug 15, including Good Class Bungalows (GCBs) along Bishopsgate, Ewart Park, Nassim Road and Third Avenue; a bungalow on Pearl Island in Sentosa Cove; and luxury condos at Leonie Hill, Paterson Hill and Tomlinson Road.
Over $1 billion worth of properties, luxury cars, cash and other assets were seized by the police. A total of 105 properties worth $831 million are reported to have been seized, including seven bungalows on Sentosa Cove and 79 condo units, of which 19 are under construction, according to the police update on Aug 18. Another 19 commercial and industrial properties were issued with the prohibition of disposal orders.
As at Aug 18, police have seized 105 properties worth $831 million, including seven bungalows in Sentosa Cove and 79 condo units of which 19 are under construction (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Countering money laundering
Following the announcement by SPF, the Monetary Authority of Singapore (MAS) said on Aug 16 that it would take “firm action” against financial institutions that have breached its requirements on anti-money laundering and countering the financing of terrorism.
“We can take this as a positive sign that Singapore is serious about making a stand on money laundering,” says Sim of Edmund Tie. “It enhances our reputation in the financial world and demonstrates how MAS and the Commercial Affairs Department are working together to flag out such money laundering activities.”
According to Sim, realtors must be vigilant about high-priced real estate deals. “It’s a clear indication to the industry that we need to know our customers and adhere to the strict anti-money laundering procedures,” he says.
Mark Yip, CEO of Huttons Asia, adds: “All real estate salespersons have a critical role to play in countering money laundering and corruption threats.” Yip says conducting a background check on customers is a legal requirement before a deal can proceed. “The checks include name, date of birth and nationality. There is no foolproof way as documents can be forged.”
If a deal is flagged as a suspicious transaction or a realtor suspects it could be, the legal and compliance department has to be informed, according to Yip. A suspicious transaction report will then be filed. “Some suspicious actions include overpaying for a property or using large amounts of physical cash,” he says.
The 230-unit freehold condo Perfect Ten by CK Asset Holdings is 97% sold since its launch in Dec 2021 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
‘Core group of buyers’
There has been a shift in the prime condo market. Where foreign buyers previously dominated, demand is now driven predominantly by Singaporean buyers, Singapore PRs and Chinese nationals who are US citizens, says STRE’s Tay.
“The more adventurous buyers that made up the fringe of the demand pie are now gone,” observes Savills’ Cheong. “You’re now left with a core group of buyers who want the traditional attributes: close to an MRT station, proximity to good schools, quality projects and reputable developers. And these local buyers are going for the one-, two- and three-bedroom units.”
That explains the popularity of condos in the Bukit Timah area in prime District 10. Top schools in the area include Raffles Girls’ Primary, Methodist Girls’ School, Nanyang Primary and Hwa Chong Institution. Hence, developments in the school catchment area are sought-after by Singaporeans, especially families with children of school-going age.
An example is Allgreen Properties’ Royalgreen on Anamalai Avenue, just off Bukit Timah Road, completed in 2021. The 285-unit, freehold condo was fully taken up by mid-April this year. Besides schools, the condo is within walking distance of Sixth Avenue MRT Station on the Downtown Line.
Royalgreen has predominantly two- and three-bedroom units with some four-bedroom units. The last 30 units snapped up in the first four months of 2023 were all two-bedroom units, sold at prices ranging from $1.846 million ($2,599 psf) for a 710 sq ft unit to $2.026 million ($2,941 psf) for 689 sq ft unit, based on caveats lodged.
Nearby on Bukit Timah Road, Hong Kong-listed CK Asset Holdings, the flagship real estate company of tycoon Li Ka-Shing, launched the 230-unit freehold Perfect Ten on Dec 18, 2021. It was just two days after the round of property cooling measures on Dec 16, 2021, with ABSD for foreigners hiked to 30% from 20%.
Sales at Perfect Ten started slow, but momentum picked up from 2H2022. Based on caveats lodged, the prices of units sold between March and August ranged from $2.589 million ($3,250 psf) for a 797 sq ft two-bedder to $4.29 million ($3,500 psf) for a 1,227 sq ft three-bedder. The project is 97% sold as at Aug 18
Perfect Ten exclusively has two- and three-bedroom units. The condo is within walking distance of Stevens MRT Interchange Station for the Downtown and Thomson-East Coast Lines and is within a 1km radius of An- glo-Chinese School and Singapore Chinese Girls’ School.
Showflat of Cairnhill 16, where all 39 units have been sold as at end Aug (Photo: TSky Development)
Surge in buying momentum
Another development that saw a surge in buying momentum since the start of the year was Cairnhill 16, a 39-unit, freehold boutique development at Cairnhill Rise in prime District 9. TSky Development, a joint venture between listed companies Tiong Seng Holdings and Ocean Sky International, developed the project.
Cairnhill 16 previewed at the end of 2021, but due to the lacklustre response, the developer closed the sales gallery at the end of 2022 for a complete revamp of its showflat. Sales took off after the sales gallery reopened at the start of the year.
While most units are two- and three-bedroom apartments, the project has nine three-bedroom-plus-study and four four-bedroom apartments. According to Kelly Ang, head of sales & marketing at TSky Development, Cairnhill 16 is fully sold as at end-August.
Units at Cairnhill 16 sold between June and July ranged from two-bedroom apartments of 775 sq ft sold for $2.155 million ($2,781 psf), three-bedroom units of 1,055 sq ft for $3.3 million ($3,128 psf), three-bedroom-plus-study of 1,292 sq ft for $3.575 million ($2,768 psf) and four-bedroom units of 1,744 sq ft for $5.606 million ($3,215 psf).
Singaporean buyers accounted for 23 (62%) of the 37 units sold at Cairnhill 16, with Chinese buyers bagging five units (13.5%). American, Burmese and Indonesian nationals accounted for two units each, with French and Swiss nationalities contributing to one each. Cairnhill 16 is scheduled for completion by the end of this year.
Another relaunched condo that saw strong take-up was the 120-unit The Atelier at Makeway Avenue, off Kampong Java Road in the Newton area, also in prime District 9. The freehold project has a mix of one- to four-bedroom units. It was relaunched in mid-April, and most units were snapped up then.
Units sold after the relaunch started from $1.417 million ($2.582 psf) for a 549 sq ft one-bedder; $2.161 million ($2,479 psf) for an 872 sq ft, two-bedder; $3.178 million ($2,481 psf) for a 1,281 sq ft three-bedder; and $3.978 million ($2,658 psf) for a 1,496 sq ft four-bedder.
The last unit to be sold at The Atelier was a 549 sq ft one-bedder on the topmost floor of the 22-storey block that fetched $1.498 million ($2,729 psf), according to a caveat lodged on Aug 2. Hence, based on the options issued, the condo is 100% sold.
The Atelier was launched by listed developer Bukit Sembawang Estates in March 2021, just over two years ago. It is a five- to seven-minute walk to the Newton MRT Interchange Station (for the North-South and Downtown Lines) and the well-known Newton Food Centre. Schools within a 1km radius include Anglo-Chinese School (Junior and Primary), Anglo-Chinese School (Barker Road), St Joseph’s Institution Junior and St Margaret’s Primary School.
The 376-unit luxury condo The Avenir is fully sold as at early August, with all the two-bedders snapped up following the cooling measures (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Diverse demand
A project in District 9 that quietly sold out all its units was The Avenir, a joint project by Hong Leong Holdings, GuocoLand and Hong Realty. The 376-unit upscale condo at River Valley Close was launched in January 2020. It has a broad spectrum of one- to four-bedroom units, ranging from 527 to 2,411 sq ft.
Within the first month of its launch, 17 units at The Avenir were sold at prices ranging from $1.88 million ($3,564 psf) for a 527 sq ft, one-bedroom unit to $8.426 million ($3,495 psf) for a four-bedroom with family area.
The last 22 units in The Avenir were sold between April and August. Except for a 2,067 sq ft four-bedder that went for $6.858 million ($3,318 psf) in April, all the other units sold were one-bedders of 527 and 538 sq ft, at prices from $1.678 million ($3,181 psf) to $1.718 million ($3,118 psf).
“The larger units were fully sold out before the recent cooling measures in April,” shares Betsy Chng, head of sales & marketing at Hong Leong Holdings. “Following these measures, most buyers of the smaller units were locals and consisted of young couples who wanted to own and live in a freehold property in a prime district. A small portion was for investment purposes.”
Singaporeans comprised 48% of the buyers at The Avenir, with PRs and foreigners accounting for 26% each. “We are fortunate that The Avenir was able to sell out relatively quickly, especially for an ultra-luxury development,” says Chng.
She attributes the sales performance to the project’s freehold tenure, prime District 9 location and convenience, with amenities such as Great World Shopping Centre, Great World and Stevens MRT Stations nearby, Eton House Pre-School, Odyssey The Global Pre-School and River Valley Primary School are nearby too. The development is a short drive to the CBD and Orchard Road.
At Klimt Cairnhill, all the four-bedroom units and two penthouses were sold out before the cooling measures in April. The developer, therefore, rolled out the two- and three-bedders targeted at Singaporeans (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Smaller units driven by quantum prices
The 139-unit, luxury condo Klimt Cairnhill by Low Keng Huat on Cairnhill Road, also in prime District 9, was relaunched in early January. Many of the four-bedroom units of 2,056 sq ft were snapped up, including the 5,920 sq ft, deluxe penthouse for $27.5 million ($4,645 psf), by Chinese buyers in the first three months of 2023. The other penthouse, a simplex of 4,898 sq ft, went for $26 million ($5,309 psf) in November 2021.
Following the cooling measures at the end of April, Low Keng Huat rolled out its two- and three-bedroom units, targeting Singaporean buyers. Units sold since then were priced from $2.65 million ($3,197 psf) for an 829 sq ft two-bedder to $2.8 million ($3,378 psf) for a two-bedroom-plus-study and up to $5.74 million for a 1,496 sq ft, three-bedroom unit. To date, about 54% of the units in the project have been sold.
“Singaporeans mainly bought the two-bedroom and two-bedroom-plus-study priced below $3 million,” says Alvin Teo, executive director of Low Keng Huat. “The entire lower stack of two-bedroom-plus-study has been sold.”
According to Teo, more than 60% of the buyers at Klimt Cairnhill are Singaporeans, with the remaining 30% made up of foreigners who are Asians with US citizenship. So far, there are no PR buyers at Klimt Cairnhill, he adds.
The 120-unit The Atelier is fully taken up based on caveats lodged, and more than 80% of the buyers are said to be locals (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Housing market ‘still resilient’
“Generally, smaller units are selling better because of quantum prices,” says Edmund Tie’s Sim. “The last couple of new launches have shown that pent-up demand has already been satiated. And if you have a $2 million budget to buy a home today, you will be spoilt for choice.”
Sim expects the Singapore housing market to remain resilient. He points to the UBS global wealth report, released on Aug 17, which showed that the average wealth per adult rose in Singapore and Norway by over US$20,000 from 2021 to 2022. Meanwhile, the average wealth per adult in other major countries such as the US, Netherlands, Canada, Australia, New Zealand and Sydney had losses exceeding US$40,000.
However, elevated interest rates are dampening the housing market, notes Sim. “While it’s high now, the fear is that it will continue to go up,” he says.
Foreigners who plan to move to Singapore will decide to rent first while applying for their Singapore PR or citizenship, says STRE’s Tay. This way, they could also avoid the punitive ABSD. “This will result in a drop in buying demand in the short term, but the mid-to long-term demand remains intact,” he adds. “Those who want to buy will look at reasonably priced residential units for their own use or for their children.”
Check out the latest listings for Cairnhill 16, Perfect Ten, The Atelier, The Avenir, Klimt Cairnhill properties
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