THE luxury homes market continues to be under pressure on both the rental and price fronts, with capital values in Singapore likely to correct further in the second half of this year.
Indeed, Singapore was the only market out of nine featured in the Asia-Pacific to report a decline in capital values. According to the latest Jones Lang LaSalle (JLL) Residential Index, values of luxury homes dropped 0.6 per cent quarter-on-quarter for the third consecutive quarter, and 2.1 per cent year-on-year, as the rounds of cooling measures continued to affect investor sentiment.
While prices may be near a trough - price dips have been slowing in the last few quarters - the introduction of the total debt servicing ratio (TDSR) in June has brought with it a degree of downside risk, said Chua Yang Liang, head of research for Singapore and South-east Asia at JLL.
To that end, Dr Chua said he expects capital values for luxury homes to correct a further 3-5 per cent in H2.
Overall, Q2 saw limited price growth in most markets, with average capital values rising 2 per cent quarter-on-quarter in Q2, similar to the 2.2 per cent increase seen in Q1. On a yearly basis, capital values were up 7.3 per cent in aggregate.
Despite restrictive tightening measures affecting sales activity, Hong Kong registered a marginal quarterly increase of 0.3 per cent on Q1. Top-performer Jakarta was up 9 per cent, while average prices in Beijing rose 6.7 per cent due to several high-end projects coming to market during the quarter.
Separately, the average monthly rent of high-end condominiums tracked by Savills continued to soften for the eighth consecutive quarter, dipping 0.2 per cent quarter-on-quarter to $4.86 per square foot (psf) per month.
The subdued leasing performance in luxury homes could be due to more intense competition resulting from oversupply in the high-end market, combined with big-budget tenants placing more constraints on accommodation expenses, said Alan Cheong, head of research at Savills Singapore.
That being said, rents may still see some support until year-end given that an increasing number of overseas nationals are arriving on short-term assignments, and thus paying slightly higher rents than those here on a longer-term basis.
In addition, much of the completed stock in the core central region (CCR) is in the form of unsold units which are still in the hands of developers.
In the CCR, 221 units at Marina Bay Suites and 210 units at Goodwood Residence were granted Temporary Occupation Permits by the end of Q2. But, given that developers are unable to lease them out unless they pay hefty additional buyer's stamp duties (ABSD) by performing an asset sale to an investment holding company, or clear them in the open market through aggressive discounting, this should give a short-term respite to the rental market for units in the CCR, said the consultancy.
Mass-market developments, on the other hand, could see rents hold up as demand drifts from the high-end and mid-tier markets.
Based on URA's quarterly data, the rental index of private residential units inched up marginally by 0.3 per cent, registering a drop from the 0.8 per cent growth recorded in the previous quarter. Island-wide median monthly rents were nearly flat with the median rent of non-landed private homes, excluding executive condominiums, inching up from $3.81 psf per month to $3.82 psf per month.
On the other hand, the monthly median rent of landed houses slipped slightly from $2.65 psf to $2.64 psf.
Leasing demand for the second quarter reached 13,522, up 15.4 per cent quarter-on-quarter, and 7 per cent year-on-year. For the first six months, leasing volume came up to 25,243, a 5.4 per cent increase compared to the same period last year.
"The greater leasing demand hints at more overseas nationals arriving in Singapore, but rents are not keeping up due to an imbalance in housing types versus needs," said Savills' Mr Cheong.
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