As rents plunge, so do luxury home prices

More sellers booking losses; some selling due to job losses, others fear outlook may worsen

The Sail @Marina Bay, where a 678 sq ft studio apartment was sold in February for $1,475 psf - a price not seen there in over five years.
The Sail @Marina Bay, where a 678 sq ft studio apartment was sold in February for $1,475 psf - a price not seen there in over five years. ST PHOTO: KEVIN LIM

Prices of luxury homes are hitting new lows at several developments as owners offload properties amid plunging rents.

An owner at Cairnhill Plaza is said to have sold his roughly 3,000 sq ft four-bedder for about $1,300 per sq ft (psf) - the lowest psf price recorded at the project since 2007.

It is believed he was pressured to sell as his private bank did not want to handle an auction sale.

A 678 sq ft studio apartment at The Sail @ Marina Bay went for $1,475 psf in late February, a price not seen at the project in over five years.

Some owners are selling due to business problems or job losses, experts noted. Others may fear the outlook could deteriorate further.

Said Ms Suzie Mok, senior director of investment sales at Savills Singapore: "Many of the apartments are vacant and it is quite difficult to get leases renewed at a good rate. The returns are not that great and if owners have made capital gains, it may be time to recycle (the asset)."

While not all sellers would have lost money - The Sail @ Marina Bay was launched in 2004 at prices from about $900 psf, for example - more sellers are booking losses.

Across the Core Central Region (CCR) - which includes the traditional prime Districts 9 to 11, the downtown core planning area and Sentosa Cove - 63 secondary market sales of condos lost money in the first quarter, according to SRX Property.

This is up from 35 of such sales a year earlier and 60 in the fourth quarter last year.

At Orange Grove Residences, for example, all three transactions this year have each involved losses of close to $1 million.

The rental market is the key culprit as it struggles with weakened demand and ramped-up supply.

Expatriates arriving these days tend to be at the middle-management or executive level, with far less generous housing budgets than in the past, said Mr Desmond Sim, CBRE head of research for Singapore and South-east Asia.

There is no longer demand for the large luxury units that are common to the CCR, he noted.

And while the Urban Redevelopment Authority's rental index for non-landed homes in the CCR has fallen just 7.9 per cent from its peak in the third quarter of 2013 to the end of last year, rents on a quantum basis have probably corrected more than that, Mr Sim added.

This is because shrinking unit sizes over time would have helped prop up rents on a psf basis.

At Draycott Eight, for example, recent contracts signed for four-bedders have fallen to as low as $13,000 a month, well under the $15,000 to $20,000 they used to command.

Luxury homebuyers today tend to be Singaporeans purchasing for their own use, usually as holiday homes or gifts to their children, said DTZ regional head (SEA) of research Lee Nai Jia.

"Hence they are not concerned about the rental yield. Some are entering the market at this point as the prices are relatively cheap, compared to when the property was launched or sold three or four years ago."

Other buyers feel the Additional Buyers' Stamp Duty will probably not be tweaked in the short term and do not wish to wait longer.

Foreign buyers, who are still in the minority, are mainly Malaysian and Indonesian permanent residents purchasing homes in Singapore as their children are studying here, Dr Lee added.

At the same time, funds continue to be on the hunt for unsold units from developers.

A fund run by Evia Capital Partners is said to have recently bought 20 units at Starlight Suites in River Valley from developer TA Corporation. Evia Real Estate managing director Vincent Ong said on Thursday that he could neither confirm nor deny the purchase. TA Corporation declined to comment.

"These funds feel commercial values have not come off enough, but residential is cheap," an agent said.

A version of this article appeared in the print edition of The Straits Times on April 18, 2016, with the headline 'As rents plunge, so do luxe home prices'. Subscribe