Published September 15, 2011
Ultra luxury apartments here to stay
WENDY TANG and LE THI DAN THUY explain why developers are in no hurry to sell
PRICES of ultra luxury non-landed homes in Singapore broke new ground in 2006. Before then, such properties could be had for an average of less than $4.5 million or $1,800 per square foot (psf). Following the economic boom in 2006-2007, these ultra luxury units - found in the Nassim, Orchard Road, Claymore, Ardmore Park and Grange Road areas - saw sharp price gains. They began transacting at nothing less than $8 million or $3,100 psf - a capital appreciation of about 75 per cent. At the peak in 2007-2008, such homes changed hands at no less than $11 million a unit, or $3,900 psf.
The gulf between ultra luxury homes and prime properties is growing wider as it is common for the former to fetch $3,000-5,000 psf nowadays. Before 2006, none of these projects transacted at more than $2,000 psf on average.
Homes built for the ultra rich have also evolved rapidly over the last five years in terms of design, specifications and other soft factors. Besides their prime location, ultra luxury properties must have the size to distinguish themselves from the small units of many new developments in the vicinity. Ultra luxury properties also boast sophisticated designs and bespoke features that strive to create exclusivity.
Renowned architects further add to the posh branding. Much attention is paid to finer details in terms of workmanship and choice of materials. In some instances, the fittings and services provided are equivalent to the finest hotel standards. Notably, in recent years, some of these ultra luxury residential developments have tied up with renowned international hotel brands for added prestige. Some examples include The Ritz-Carlton Residences, St Regis Residences and W Residences.
It is fast becoming the norm for ultra luxury apartments to have their own private pools, saunas and wine cellars. But Singapore has yet to catch up with some markets where luxury living has been elevated to a whole new level. For example, One Hyde Park, in Knightsbridge in London, was designed to deliver the ultimate lifestyle at every level. Each apartment was built to exacting standards and allows residents to imprint their own personality on it. Residents are also treated to five-star hotel services with a 24-hour concierge, valets and butler room services. Service areas are connected to the residences via an underground tunnel to provide maximum convenience to owners.
Bespoke homes at a premium
In the second quarter, Singapore's high-end residential segment, as represented by properties in the Core Central Region, had seen price gains of 45 per cent from the low in 2009. This was after they dropped 28 per cent from their all-time peak in 2008.
A new record was reportedly set this year, with a transaction done at just under $6,400 psf, or around $19 million in total, for a unit at The Marq on Paterson Hill. The previous record was set in 2007, when a unit at The Orchard Residences was sold at about $5,600 psf, or $28.3 million in total.
This, however, is still far below the record prices seen in other major property markets. One Hyde Park, for instance, transacts at an average £6,000 psf (S$12,000 psf), with the record price at £136 million. Luxury apartments in Paris can fetch 4,600 euros psf (S$8,000 psf).
In Asia, Hong Kong has one of the world's most expensive housing markets with luxury apartments commanding an average price tag of $68 million (or $11,000 psf). As the quality of lifestyle offerings improves, one wonders why Singapore's ultra luxury segment has not caught up with its overseas counterparts.
Singapore attracts wealthy investors
Singapore properties are highly favoured by the ultra rich in India and East Asia as investments, as a recent survey by Knight Frank and Citi Private Bank showed. The city is an attractive market for international investors because of its competitive business environment, established infrastructure, stability, well-developed financial sector and favourable taxation policies. Also, economic growth rates here are still higher that those of the US and European Union.
In recent years, more foreigners have been acquiring prime properties here. In H1 2011, foreigners made up 44 per cent of property purchases in the prime districts of 9 and 10, up from 38 per cent in 2010 (see Table 1).
Wealthy investors from Indonesia and China account for the bulk of foreign property purchases. Indonesians remained the top buyers, accounting for 30 per cent of foreign purchases. Chinese buyers are a fast growing segment, with their share surging from 2 per cent in 2006 to 18 per cent in H1 2011 (see Table 2).
The trend is more prevalent for ultra luxury properties where seven in 10 buyers this year are foreigners. Four years ago, the proportion was three in 10.
Buyers in the ultra luxury segment in Singapore are currently staying on the sidelines in view of the fragile global economy, with a possible double dip recession in the US and sovereign debt problems in the EU. This has been exacerbated by the gyrations of the local stock market. However, ultra luxury home prices are not expected to drop significantly as developers are not in a hurry to sell even as buyers wait for a window of opportunity.
The purchase of ultra luxury properties requires an optimal combination of the right product offering and discerning buyers. While the current low interest rate environment supports property investment, developers need to raise the ante to win over buyers. As developers hone their offerings, it looks like ultra luxury homes in Singapore are set to grow.
Ms Tang is executive director, head of residential services, and Ms Le is analyst, consultancy & research, at Knight Frank