Is there a silver lining for high-end condos?

By
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Tay Hock Meng
/ The Edge Property
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January 29, 2016 10:00 AM SGT
A wave of transactions in the high-end condominium segment last month provided a glimmer of hope that 2016 could be the year that the Core Central Region (CCR) could see a turnaround in transaction volume. The CCR includes Marina Bay, Sentosa Cove and prime districts 9, 10 and 11.
At Richmond Park, a 1,259 sq ft, two-bedroom unit was sold for $2.88 million ($2,287 psf), according to a caveat lodged on Dec 17. The former owner purchased the unit for $2.44 million ($1,939 psf) in a sub-sale in May 1997. The capital appreciation was close to 18% over 19 years. If the owner had been an investor and the unit was leased for $5,000 to $6,000 a month over the past two decades, the gains will be even higher, reckons Joseph Tan, executive director of residential services at CBRE.
The previous transaction at Richmond Park was in August 2014, when a 1,550 sq ft unit on the 11th floor was sold for $4.02 million ($2,590 psf). The 159-unit freehold condo is located behind the Paragon shopping mall on Bideford Road. At its peak, a 3,380 sq ft penthouse was sold for $10 million, or an all time high of $2,959 psf, according to a caveat lodged in 2012.
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Richmond Park was developed by the former DBS Land (now part of CapitaLand) and completed in 1996. Tan was the marketing agent for the project in 1994 when it was first launched. “It was the first condo where psf prices hit four digits,” he recalls. “All the units were sold out in 1½ days and achieved an average price of $1,000 psf.”
The market may be very different from what it was two decades ago. However, the Cairnhill area remains a favourite among wealthy Indonesians, many of whom purchased units at Richmond Park 20 years ago. The main attraction was its location and proximity to the Orchard Road shopping strip and Mount Elizabeth Hospital and Medical Centre. “They buy the units and use them as a holiday home or resting home when they are here for medical treatment,” adds Tan. “It’s the ‘Mount E syndrome’.”
At $2,287 psf, Richmond Park looks attractive, says Samuel Eyo, managing director of Singapore Christie’s International Real Estate. “There has been an increase in the number of people shopping for deals in the high-end segment,” he adds. “Some people are still looking out for fire sales and hoping to pick up something at a discount of 40% to 50%. Others are happy when they get a 15% to 20% discount on the asking price.”
Ardmore Park revival? Interest in Ardmore Park seems to have revived towards the end of last year. A 1,776 sq ft, three-bedroom apartment at Ardmore 3 was sold for $5.44 million ($3,064 psf), according to a caveat lodged on Dec 22. “It’s a good price for a unit on the 10th floor of the tower,” says Eyo. The previous transaction was in June, when a unit on the 19th floor was sold for $5.83 million ($3,281 psf).
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Wheelock Properties is said to be previewing Ardmore 3 this year. To date, five of a total of 84 units in the freehold condo have been sold. Last year, the project was showcased in Hong Kong by CBRE and Singapore Christie’s International. On the weekend of Jan 16 and 17, Singapore Christie’s International will be marketing Ardmore 3 in Kuala Lumpur.
The exchange rate between the Singapore dollar and the Malaysian ringgit is hovering at $1 to RM3.05. The price of the unit on the 10th floor of Ardmore 3 that was sold for $5.44 million in December would therefore translate to RM16.6 million. That excludes the 15% additional buyer’s stamp duty that foreign buyers are subject to. “Malaysians continue to view Singapore as a safe haven,” says Eyo. “Buying a prime freehold property such as Ardmore 3 will provide a good hedge against a falling currency.”
Ardmore 3 will be previewed this year with a roadshow in Kuala Lumpur on Jan 16 and 17
Under the conditions of the Qualifying Certificate (QC), Wheelock Properties will have to sell all the units in the development within two years of completion — that is, by December 2016. Beyond that, the developer will have to pay extension charges of 8%, 12% and 16% for the first, second and third years respectively. The extension charges will be based on land cost pro-rated according to the proportion of unsold units.
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At Ardmore II, a 2,024 sq ft four-bedroom unit on the 17th floor changed hands for $5.03 million ($2,486 psf), according to a Dec 15 caveat. The unit was purchased by the previous owner in October 2006 for $4.56 million ($2,252 psf), when the project was launched then. The previous owner saw a capital appreciation of 10.4%.
The seller of the adjacent unit on the 17th floor of Ardmore II did not fare as well. The unit was sold in September last year for $5.05 million ($2,496 psf). However, the seller saw a loss of 17.2%, as the unit was purchased in a sub-sale in August 2007 for $6.10 million ($3,014 psf).
Higher number of deals at $3,000 psf Last month saw two condo deals hit the $3,000 psf mark. Besides the unit at Ardmore 3, a 3,348 sq ft, three-bedroom unit on the ninth floor of Eden Residences Capitol was sold for $10.26 million ($3,065 psf), according to a caveat lodged on Dec 14.
The previous transaction at Eden Residences Capitol was in June 2014, when a 3,520 sq ft unit on the third floor was sold for $10 million ($2,841 psf). To date, more than 45% of the 39 units have been sold, according to an official announcement.
Eden Residences Capitol is a newly built high-end residential block designed by Pritzker Prize laureate Richard Meier and is located next to Peninsula Plaza. It is part of the landmark Capitol mixed-use development that includes the Capitol Piazza retail mall, the historic Capitol Theatre and the soon-to-be-opened Patina Capitol, a luxury hotel located within the former Capitol Building and Stamford House heritage buildings, which have been conserved. The consortium behind Capitol is Pontiac Land and Perennial Real Estate Holdings.
Even though the high-end segment has seen a price correction over the past two years, 2015 saw 45 apartment and condo deals above $3,000 psf, surpassing the 32 non-landed residential transactions above $3,000 psf in 2014. The highest psf price achieved last year was $4,000 psf for a 3,961 sq ft, four-bedroom unit on the fifth floor of Le Nouvel Ardmore. The 43-unit luxury condo project by Wing Tai Holdings was designed by Pritzker Prize laureate Jean Nouvel. It also hit a new record for the highest absolute price of $51 million for the sale of a 13,875 sq ft duplex penthouse last April.
The higher number of condo transactions above $3,000 psf in 2015 was no surprise to Alan Cheong, head of research at Savills Singapore. “Transactions in the high-end luxury segment were front-loaded towards the first three quarters of 2015. It was interrupted when the haze struck and there was a lull before transactions picked up again in November,” he observes.
‘Clutching at straws’ However, in the current market, “it’s very difficult to justify prices above $4,000 psf”, concedes Cheong. “It will be like clutching at straws, especially with the Singapore government cracking down on money laundering.” However, luxury condos with concierge service priced in the $3,000 to $3,500 psf level can still find buyers, he adds.
November saw the transaction of a 3,057 sq ft unit on the fifth floor of the ultra-luxury The Marq on Paterson Hill, the first sale since August 2013, when a 3,089 sq ft unit on the sixth floor was sold for $12.5 million ($4,046 psf).
The unit on the fifth floor changed hands for $10 million ($3,271 psf). The previous owner purchased the unit in August 2007 for $11.16 million ($3,651 psf). The price of $3,271 psf has also set a new low for the ultra-luxury project.
It is a far cry from the lofty prices seen five years ago, when a 3,003 sq ft unit on the 20th floor was sold for $20.54 million, or a record- breaking $6,840 psf, in November 2011, the highest in terms of price psf achieved for a condo in Singapore to date. Another unit on the 22nd floor fetched $19.2 million ($6,393 psf) in August that year. The Marq on Paterson Hill was the first project to see prices cross $5,000 psf, when a 6,157 sq ft unit with a lap pool was sold for $31.4 million ($5,100 psf) in 2007.
Today, projects in the prime districts that see the most activity are those priced in the $2,000 psf bracket — for instance, GuocoLand’s Leedon Residence, which obtained Temporary Occupation Permit (TOP) in June 2015. As at end-November, 215 units in the 382-unit freehold project had been sold, making it the bestselling project in the CCR for 2015. Prices of units sold last year ranged from $1,520 to $2,433 psf.
‘Polarised housing market’ The thin and spotty transaction volume in the CCR has made it difficult for homeowners who are under pressure to sell or those who want to liquidate their assets in order to invest their cash elsewhere. Cheong says the housing market remains polarised, with some sellers offloading now for fear prices could fall further. “More homeowners are losing patience, especially those who purchased in the pre-GFC [global financial crisis] period and have been waiting for the market to recover,” he adds. “On the other hand, some buyers are still waiting for the property market to crash before jumping in.”
The result is an increase in the number of distressed sales. A recent example in December was at Leonie Parc View, a 2,250 sq ft, four-bedroom unit on the ninth floor was sold for $4.45 million ($1,978 psf), according to a caveat lodged on Dec 22. The previous owner purchased the unit in June 2007 for $6.61 million ($2,938 psf). This means he saw a loss of 32.7% over eight years.
The price of $1,978 psf is the lowest price achieved at Leonie Parc View to date. The project was launched by Soilbuild Group in mid-2007 and units were sold at prices ranging from $2,210 psf for a unit on the seventh floor to $3,489 psf for a unit on the 22nd floor. The 44-unit freehold boutique condo on Leonie Hill Road was completed in 2009.
One Shenton also saw a new low when a 1,184 sq ft unit on the 13th floor was sold for $1.75 million ($1,478 psf), according to a caveat lodged on Dec 24. The previous owner purchased the unit for $2.07 million ($1,748 psf) in a sub-sale in November 2008 during the global financial crisis. Therefore, he realised a loss of 15.4%.
The latest price psf at One Shenton is lower than the $1,491 psf achieved by the owner of a 1,581 sq ft, three-bedroom unit that was sold for $2.36 million in September 2015. The previous owner purchased the unit for $3.39 million ($2,140 psf) at the peak of the last property boom in October 2007. Hence, he saw a loss of 30.3%.
In Sentosa Cove, a 2,024 sq ft, three-bedroom unit at The Coast changed hands for $3.3 million ($1,631 psf), according to a Dec 16 caveat. The unit on the fourth floor was purchased by the previous owner in a sub-sale for $4 million ($1,977 psf) in 2010. The latest sale translated to a loss of 17.5%. The seller and buyer are believed to be Singaporeans. “The owner wanted to liquidate his investment, as he was eyeing opportunities elsewhere in Singapore,” says Brandon See, DTZ’s senior sales director, who brokered the sale.
A three-bedroom unit at The Coast changed hands for $3.3 million ($1,631 psf), which is 17.5% below the
purchase price of $4million ($1,977 psf) in 2010
Pickup in 2016? With interest in high-end condos reviving, transactions in the CCR could pick up this year. “When transaction volume increases, sellers will not be under so much pressure to accede to lowball offers,” says Savills’ Cheong.
Some buyers have held back on their purchases, waiting for prices to collapse, he adds. Therefore, a tremendous store of wealth and pent-up demand have built up over the past two years. “Once these buyers are convinced that prices are unlikely to fall sharply and have in fact stabilised, they will return,” Cheong says. “And this is what we are seeing right now.”
Supply in terms of new launches could also play a part in stimulating transactions, especially if developers roll out high-end projects that are affected by the conditions of the QC. An example is OUE Twin Peaks, a 462-unit, 99- year leasehold project on Leonie Hill Road. Developed by OUE Ltd, the project obtained its TOP in February 2015. One of the towers was relaunched in November, with absolute prices for one- to three-bedroom units ranging from $1.5 million to $3.8 million. Two units have been sold over the past two months: a 1,399 sq ft unit on the ninth floor for $3.7 million ($2,644 psf) and a 1,055 sq ft unit on the 35th floor for $3.27 million ($3,098 psf), according to recent caveats.
Most property consultants are relieved that the 4Q2015 URA flash estimates showed a smaller decline in the private property price index of just 0.5%, which is the slowest quarterly price fall for the year. “Given that the overall private property price index was down by only 3.7% last year, it shows that prices are stabilising,” says CBRE’s Tan. “There will be the occasional blips, but in the absence of a major calamity, things should stabilise this year.”
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This article appeared in the City & Country of Issue 710 (Jan 11, 2016) of The Edge Singapore.