High-end property prices drop in 2016

Mr Wee Cho Yaw's private real estate arm bought 45 units at The Nassim at a discount of about 18 per cent, which seems to suggest the market for top-end property has bottomed out.
PHOTO: The Straits Times

Prices in the luxury property market fell last year but experts say upgraders should proceed with caution.

Values in prime districts - from the Central Business District to Orchard Road and Tanglin - declined 1.2 per cent over 2016, but that was a better performance than in other parts of the island, according to Urban Redevelopment Authority (URA) figures.

URA noted in data out on Thursday that prices fell 2.8 per cent in the city fringe and 3.4 per cent in the suburbs.

The high-end market also recorded the biggest increase in the number of transactions last year, up 48.7 per cent over 2015, easily beating the 27.2 per cent rise in the city fringe and the 3.7 per cent rise in the suburbs.

Investors might be tempted to take the lead from veteran banker Wee Cho Yaw, whose hand in two big-ticket deals this month suggests the market for top-end property has bottomed out.

Mr Wee's private real-estate arm Kheng Leong bought 45 units at luxury condominium The Nassim for $411.6 million, after a discount of about 18 per cent from developer CapitaLand.

Earlier this week, property developer UOL - which Mr Wee chairs - snapped up an attractive freehold site at 45, Amber Road, for $156 million.

But property analysts say Mr Wee's purchases were exceptional.

International Property Advisor chief executive Ku Swee Yong said of Mr Wee's The Nassim purchase: "For a brand-new luxury property in the top area of Singapore, the price paid of $2,300 per sq ft is simply the land price.

We might say that Mr Wee got the apartments for free.

"This transaction has set a new low for the Nassim neighbourhood."

Dr Lee Nai Jia, head of South-east Asia research at Edmund Tie and Company, said it was certainly a good time for those with deep pockets to go shopping as en-bloc purchases and auction prices have come down significantly.

However, Dr Lee noted that sellers may not lower their prices significantly for those wanting to buy individual new homes, adding that he expects prices to fall further, albeit at a gentle pace.

Mr Desmond Sim, head of research at CBRE, said Mr Wee's deals will likely be overshadowed this year.

"We expect more of such en-bloc purchases. Correcting the per square foot prices will incentivise people to be 'white knights' for developers who want to avoid the qualifying certificate penalties," Mr Sim noted.

But the market is driven by "quantum play", he added, as median prices will continue to fall amid gloomy economic fundamentals.

Analysts also said that the steep discounts for Mr Wee's purchases - both of which are freehold - does not mean the premium for freehold, compared with a 99-year lease, has eroded.

Mr Eugene Lim, key executive officer at ERA Realty Network, said sellers still expect to offload freehold properties at a 15 to 20 per cent premium.

"However, with the different characteristics of properties, it is difficult to give an accurate comparison between freehold and leasehold properties," he added, citing the case of 8@Woodleigh, which has a 99-year lease, and Blossoms@Woodleigh, which is freehold.

While the two are adjacent, their prices are similar, with 8@Woodleigh selling for $1,270 per sq ft and Blossoms@Woodleigh for $1,260 per sq ft.

Ms Tricia Song, head of research at Colliers International, said it was still timely for buyers to look for good deals in the top-end market.

"We are positive on the luxury property market as it has the least new supply over the next two to three years," added Ms Song.

"While rents could be slow to recover, buyers who hold for the long term should enjoy good capital returns, in particular when the Government relaxes some of the cooling measures, such as the Additional Buyer's Stamp Duty."


This article was first published on Jan 28, 2017.
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