The government’s announcement of an additional buyer’s stamp duty (ABSD) on top of the existing 3% appears to be mainly targeted at foreign buyers, notes UOB Kay Hian in a report. “The move will act as a strong deterrent for foreign buyers as their transaction costs would increase by 10% overnight,” says Vikrant Pandey, analyst at UOB KayHian. The high-end market will be the most impacted as foreign buyers account for as high as 50% of all purchases in this segment, he adds.
Pandey expects the latest round of measures to have a bigger impact on developer sales (primary market volume) as it was up by more than 15% y-o-y in 3Q2011 compared with secondary market volume (resales and sub-sales), which was down 30% over the same period. He predicts that monthly sales volume will contract by 25% to 30%, and prices to fall by 10% to 15% over the next one year.
Most of industry players including developers were caught off guard by the latest and two years. According to a niche luxury developer who declined to be named, “this will definitely affect the Singapore residential market. [Developers] are very disappointed with their timing and approach. It’s a little too reactive and extreme.”
However, property consultants are not expecting developers to reduce prices anytime soon. “It will come in the form of some incentive, for instance, the absorption of stamp duty, or extended early bird discount,” says Png Poh Soon, head of consultancy and research at Knight Frank. “It’s too early to tell what the impact will be,” concedes Phylicia Ang, executive director of residential at Savills Singapore.
The proportion of residential units purchased by foreigners has increased in the past decade, with the sharpest rise seen this year, says Nicholas Mak, executive director of research and consultancy at SLP International. From 1995 to 2006, non- Singaporeans accounted for about 10% to 20% of the private homes transacted on the primary and secondary markets. In 2009, foreign buyers accounted for 22% of private home purchases, and that percentage grew to 24% in 2010. For the first 11 months of the year, foreign buyers made up 28% of private home purchases.
One of the prime condominiums that saw increased buying interest from foreigners last month was Scotts Square by Wheelock Properties, which obtained its temporary occupation permit (TOP) in September. It features 338 high-end apartments in two towers of 35- and 43-storeys sitting on top of an 80,000 sq ft retail podium. The freehold development is located in the prime Scotts Road, flanked on both sides by the Grand Hyatt and Marriott Hotel. Apartments are a mix of one-, two- and three bedroom units, with sizes ranging from 624 to 1,249 sq ft.
Since obtaining their temporary occupation permits, the residential units in the development have seen a spike in transactions. There were three in the week of Nov 15 to 22, based on the latest caveats lodged and downloaded from URA Realis as at Dec 6. According to Joseph Tan, executive director of residential services at CB Richard Ellis (CBRE), the exclusive marketing agent for Scotts Square, almost 20 units were sold since TOP, with most of the units sold in November. However, caveats have yet to be lodged.
Although there haven’t been that many sub-sale transactions, owners are now asking for prices in the range of $4,000 to $5,000 psf, says Don Chiam, a property agent and division head of Savills.
The most recent transaction was the subsale of a 1,249 sq ft, three bedroom unit on the 13th floor, which changed hands for $4.7 million ($3,764 psf). Two other units on the 11th level, both 635 sq ft, one-bedroom apartments, were sold for $2.4 million each ($3,710 psf) on Nov 17. To date, well over 250 units have been sold at the latest median price at $3,710 psf. In terms of rental rates, a 947 sq ft, two-bedroom unit was recently transacted at $8,000 per month, which works out to around $8.44 psf per month, notes CBRE’s Tan. Quite a few customers are also “repeat buyers”, those who had bought a unit for their own use earlier, and then purchased another unit as an investment. Almost half of the buyers are said to be foreigners.
Scotts Square is said to be popular with foreign buyers, particularly Indonesians and Chinese. “The Indonesian buyers, in particular, like it because of the location where there are many luxury boutiques but the interest among local investors are increasing as well,” says Lily Gozali, a senior realty adviser of KF Property Network. “It’s too early to tell what the new measures will have on foreign buying interest.”
Investor interest has returned to Scotts Road area possibly owing to the recent preview of Far East Organization’s 231-unit Scotts Tower, a small office/home office (Soho) project. Of the initial 56 units released in the 103-year leasehold project located at the corner of Scotts Road and Cairnhill Road, 34 had been sold prior to its official launch. Average prices achieved for the units sold are said to be $3,100 psf. Quantum prices start from $1.9 million for a 624 sq ft one-bedroom Soho apartment. The project is designed by awardwinning, co-founder and principal architect of UN-Studio in Amsterdam, Ben van Berkel, and contains one- to three-bedroom apartments and four-bedroom penthouses. Given the positive response, Far East Organization officially launched the project on Dec 7.
Source : The Edge – 12 Dec 2011