Prices of Singapore's luxury prime properties continue to lose steam despite a pick-up in the segment's sales volume in the second quarter, and this trend is likely to continue, says a report by Jones Lang LaSalle.
The average resale capital value for prime luxury properties fell 2.9 per cent quarter-on-quarter in Q2 to around $2,380 per square foot (psf), marking a second consecutive quarterly fall after a long period of stability.
At the same time, resale capital values of typical prime properties also dipped during the period by 1.5 per cent from the last quarter to about $1,350 psf.
This, despite a pick-up in sales volume in the prime districts, according to preliminary estimates, which showed a 22 per cent increase in units transacted to 528 units in Q2 compared with 434 units in Q1.
The spike was mainly driven by healthy uptake in both new sale and resale segments, which recorded a respective growth in volumes of 38.5 per cent and 22.9 per cent over the previous quarter.
A higher number of prime market developments launched in Q2 also helped to generate interest and buoy transaction volumes.
A total of 101 core central region (CCR) units were launched in April and May (close to the 112 launched during Q1), providing new supply to the segment.
Specifically, new boutique developments, such as UP @ Robertson Quay and 1919 on Mount Sophia, proved popular among buyers, selling more than 60 per cent and 90 per cent of their units respectively at the end of the quarter.
An estimated 778 units were completed in Q2, up almost five times from Q1.
The largest project, The Trizon, added 289 units to the market, followed by Rochelle at Newton with 129 units and RV Suites with 96 units.
However, the jump in supply dampened overall yields as average prime rental values dipped 1.2 per cent from Q1 to around $49 psf per annum ($4.08 psf per month), while average typical prime rental values fell 2.2 per cent to $38 psf per annum ($3.16 psf per month).
Explaining the segment's lacklustre rental performance, Jane Murray, head of research (Asia Pacific) at Jones Lang LaSalle said: "Rents have fallen, especially in older prime properties, large units, and properties facing construction. Lower rents are increasingly being accepted in struggling projects, while housing allowances are being reduced and expatriates are relocating to other countries negatively impacting leasing demand."
She noted that tenants were increasingly switching their focus to outside the prime market, especially in areas such as East Coast, where size-comparable units are available at lower asking rents.
Ms Murray expects further declines in both rents and capital values over the next 12 months in the prime residential segment amid lingering uncertainty in the global economy, and as tenants and buyers look for good-value properties in the light of falling housing allowances and high prices.