ST : Luxury home prices may hit 2007 high

Jan 16, 2010

Luxury home prices may hit 2007 high

Property tycoon paints rosy outlook, plans new project
By Joyce Teo

IF PROPERTY tycoon Kwek Leng Beng is right on the money, then the prices of prime luxury homes could charge back to their dazzling 2007 highs by the end of this year or perhaps next year.

This ultra-rosy outlook assumes the world economy continues to improve, the City Developments' executive chairman said during an interview in response to a question posed by The Straits Times.

Of course, his forecast that high-end prices will rise is not new. Plenty of property consultants have been tipping a rise in the high-end sector this year.

But the degree of optimism of an industry leader such as Mr Kwek could turn heads - and he insists he is not simply talking up the market for his own ends.

'People say I like to talk up the market. It is not that I like to talk up the market. It is that more often than not, I would say I am 90 per cent correct in predicting the market,' he said.

'This can only arise from my many years of experience, from the mistakes I learnt from, from the intuition that I have. I also understand the psychology of people.'

In fact, he does not want to see prices rise too rapidly. 'I hope the increase will not be so dramatic as to provoke concerns,' Mr Kwek said.

A return to the previous peak levels is possible by the end of this year, and if not, then by next year, he said.

'My reading is that the rich Chinese buyers will come one day,' he said.

The integrated resorts (IRs) will help to draw many foreigners here, and some of them may decide to buy a home here if they like the IRs, said Mr Kwek.

Last year, it was the turn of mass market and mid-tier properties to rise - driven largely by demand from upgraders.

In contrast, the high-end sector witnessed an exodus of all-important foreign buyers and has yet to get on track for a significant recovery despite some tentatively good signs.

Mr Kwek feels luxury home prices can easily jump by more than 10 per cent this year as they are still about 25 per cent off the previous peak.

The higher the market goes, the greater the number of buyers, he said. Conversely, when the market slips to a low point, many will not want to buy, he said.

Mr Kwek's views were, to a certain extent, shared by Colliers International director of research and advisory Tay Huey Ying.

She believes luxury home prices could reach or surpass the previous peak by the end of the year on an average basis.

'Our basket of super high-end or luxury homes peaked at $3,174 per sq ft (psf) in late 2007 and early 2008. As of the end of last year, our prices were only 9 per cent off the peak,' she said.

'However, this luxury segment is not likely to achieve another record price this year, given the expected modest growth in the global economy.'

Indeed, there are still downside risks to reckon with, said Jones Lang LaSalle's head of research for South-east Asia, Dr Chua Yang Liang. For instance, the speed of economic recovery in the sluggish United States is uncertain, he said.

The high-end market will not necessarily move as one, and some projects may outshine the rest.

'Selective luxury projects with a good location and finishes may attempt to puncture the previous peak levels when our economy further improves in 2011,' said Dr Chua.

Naturally, Mr Kwek hopes to be among those to stand out from the rest. He is preparing to introduce a new brand in possibly the next three months.

He said he is still tying up loose ends on the 228-unit W Residences project on the Sentosa Quayside site, where a W Hotel will also be built.

The residential part of the project could be priced from about $2,500 psf to $3,000 psf, and will be his second branded project here, after St Regis Residences.

Other projects that his Hong Leong group and City Developments intend to push out soon include Cube 8 on Thomson Road and 76 Shenton on the former Ong Building site.