2010: The year of luxury homes
5-10% rise seen in high-end residential prices; slight drop expected in the number of GCB transactions
By UMA SHANKARI
PRICES of luxury and high-end homes in Singapore started inching up in 2009, but analysts and developers here are confident that there is room for further growth.
Developers here are unanimous in agreeing that mid to high-end residential prices will climb in 2010. And among property consultants, the expectation of price growth ranges from 5 to 10 per cent for the most part, although some are predicting increases of as high as 30 per cent.
Data from Savills Singapore shows that the prices of high-end homes on the mainland in Districts 1, 9, 10 and 11 (which include Shenton Way, Orchard, Holland, Newton and Bukit Timah) have been climbing since Q2 2009.
The average unit price of high-end homes fell from $1,621 per square foot (psf) in Q2 2008 to $1,174 in Q1 2009, the property firm said. But prices have since rebounded and the average unit price of high-end homes was $1,543 psf in Q4 2009.
And they still have some way to go.
'We are very positive on the luxury sector,' said Savills Singapore managing director Michael Ng. 'The segment is still a laggard (in terms of prices) compared to the mass and mid-range markets.'
Echoed OCBC Investment Research analyst Foo Sze Ming: 'We reiterate our positive view on the high-end property segment as it is likely to benefit most from the opening of the two integrated resorts this year.'
However, estimates for how much prices in this segment are expected to climb vary greatly, with predictions ranging from 5 per cent to 30 per cent.
Over the last year, prices of mass and mid-range private homes have caught up with and even surpassed that seen during the previous peak. But for the high-end/luxury segment, prices are still some 25-30 per cent off their peaks, Savills' Mr Ng said.
'We are confident that (high-end/ luxury) prices will move as much as 30 per cent over the next 12-24 months,' he added. 'We have already seen this happen in the mass market, over just the last nine months.'
Other estimates are more modest. Goldman Sachs yesterday raised its forecasts for high-end property prices, and now expects high-end prices to rise 10-15 per cent. The bank's research shows that by segments, luxury home prices are 19 per cent below their 2007 peak, while prime and mass-market home prices are respectively 8 per cent and 4 per cent lower than their previous peaks.
'We expect the high-end to lead for the better part of 2010; there is still positive carry in rental yields, as rents hold steady even as consensus braces for a 10 per cent decline,' said analysts Paul Lian and Rishab Bengani. And as the volume of total home sales falls, the high-end and luxury markets are expected to make up a larger piece of the pie.
On a yearly basis, 2009 saw the second highest number of new private home sold. Developers sold around 14,500 new homes last year - second only to the record take-up of 14,811 units in 2007.
But in spite of the high volume of new sales last year, caveats lodged show that the total value of the homes sold is only around 60 per cent of that in 2007. The lower quantum was attributed to the dominance of mass-market and mid-tier homes that were sold in 2009, compared to 2007 when high-end homes stole the limelight.
This is expected to change in 2010. Analysts reckon that the take-up in 2010 will moderate to 8,000-10,000 units. But the activity is expected to move into the high-end and luxury segments. Mr Ng estimates that the volume of high-end and luxury home sales could climb by 50 per cent.
The year began well last week, with property giant CapitaLand reporting that it has sold 60 apartments in the 165-unit Urban Suites condominium in the Cairnhill area, at prices ranging from $2,400 to $2,700 psf.
In line with the rising interest in luxury homes, sales of good class bungalows (GCBs) also picked up in 2009.
According to CB Richard Ellis, the average price on a psf basis reached a high of $826 last year, up from $820 in 2008 and $681 in 2007.
And transaction volumes have also started picking up.
Data from Savills Singapore shows that 74 GCBs worth a total of $1.3 billion changed hands in 2009. This was a up from 43 GCBs and $745.7 million in 2008.
Most of the transactions last year took place in the second half of the year - 35 GCBs were sold in Q3 and another 15 were sold in Q4 2009.
'A lot of people jumped into the GCB bandwagon from April last year,' said Savills Singapore's director of investment sales and prestige homes Steven Ming. 'People sidelined themselves from the GCB market in 2008 in anticipation of a further slowdown in the economy. So there was a backlog of demand.'
Sales were also boosted by a low interest rate environment.
For 2010, Mr Ming expects a slight drop in the number of GCB transactions, and estimates that 60-80 bungalows will be sold: 'We are expecting volumes to slow in 2010 because those investors who wanted to buy in the last two years would have bought last year.'
As for prices, no big surges are expected either, with Mr Ming predicting at most a 5-10 per cent climb for the GCB market in 2010.
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
The year began well last week, with CapitaLand reporting it has sold 60 apartments in the 165-unit Urban Suites condominium (artist's impression above) in the Cairnhill area, at prices ranging from $2,400-$2,700 psf.
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