Lure of the lion
Industry experts and investors are optimistic about the mid- to long-term outlook for the Singapore property market, particularly at the high and luxury end. Despite what is described as the levelling off of the market in the latter part of last year and the start of this year resulting from the knock-on effects of the United States credit crisis and subprime woes, sales are predicted to take off again this year.
Growth is likely to be steady this time, with less of the spectacular short-term profits from 'flip' sales that were a feature of last year. Last year was a record year for Singapore's property market, with capital values in the luxury end of the market shooting up 57.1 per cent and, according to Hong Kong-based HKR International, some investors reaped gains of up to 80 per cent on ultra high-end apartments. During the same period, average rents for luxury condominiums rose by 64.3 per cent.
Price records were made and broken regularly, with one unit in Singapore's most expensive condominium project - The Marq on Paterson Hill, just off Orchard Road, fetching a record S$5,100 (HK$28,786) per sqft breaching for the first time, the S$5,000 mark for the highest per sqft unit price. The 6,157 sqft penthouse unit went for a cool S$31.4million.
This smashed the week-old record of S$4,653.50 per sqft set by an apartment in the prestigious St Regis Residences. The record-breaking deal was brokered by Jerry Tan, managing director of Jerry Tan Residential, specialist in high-end luxury residential sales. Mr Tan is optimistic about the future, despite the fact that only 316 new homes were sold in Singapore in January.
'Anybody entering the market now has to look at the big picture. It is very clear: the population increase, driven by government plans encouraging foreign talent and foreign companies to settle here, the multinational corporations that are relocating their Asian headquarters to Singapore, the integrated resort [complex comprising casinos, entertainment outlets, and convention and retail space] coming online, the Youth Olympics and the Formula One night race due to take place here all mean that Singapore is set to grow.'
Simon Cheong, chairman and chief executive of SC Global Developments, echoes these thoughts. Speaking as president of the Real Estate Developers' Association of Singapore (Redas) at its Spring Festival celebration recently, he said the property market was set to 'gain some traction in the second half of 2008'. Speaking at the same event, the Minister of State for National Development, Grace Fu, says that, 'while the market is quiet, prices are still firm and demand for property still resilient'.
Mr Cheong says with interest rates in Singapore at a record low, investors will be encouraged to put their money in assets with higher returns, such as real estate. 'The yield trend is looking good for property and rental rates are predicted to continue rising this year, so rental yields and thus capital values will move up. Buyers and investors will figure this out pretty soon.'
Chia Ngiang Hong, Redas' first vice-president and group general manager of City Developments, confirms that foreign investors are still interested in investing in property in Singapore. 'The recent removal of the estate duty also helps the super-rich to focus on Singapore again.'
Location is also important. Singapore, as an island city state, can offer investors the choice of either urban city or seaside resort properties. One such, much acclaimed, development is The Oceanfront @ Sentosa Cove, which recently won the BCA Green Mark platinum award - the first private residence to receive this honour for environmentally sustainable development. The Oceanfront, at 15 storeys, will be the tallest building there, giving residents the best views on the island.
Mr Tan recommends sticking to the central districts around Orchard Road. 'I think that prime freehold residential property in central prestigious districts 9, 10 and 11 will be like central London in future. Prime properties are more resilient in a market downturn, and the first to go up when the market corrects in the opposite direction.'
He also predicts that this year is the time for strategic buys into developments completing this year and says that secondary sales have been brisk in January and February - particularly to owner occupiers who are displaced by the en-bloc phenomenon (whereby developers buy out all the units of a property and redevelop it) and to expatriates who are willing to buy rather than pay exorbitant rents. Mr Tan says specific developments of this type worth watching are: The Grange at Grange Garden, which consists of 95 units of three or four bedrooms and penthouses, housed in two towers of 19 and 23 storeys; the Paterson Residence on Paterson Road, which is one 23 storey tower and six townhouses - a total of 110 units - with three or four bedrooms; The Watermark, which is an interesting, part conservation, 10-storey building fronting the Singapore River. It comprises 206 units of two, three and four bedrooms; and Park Infinia on Lincoln Road which has four towers and 486 units of two, three and four bedrooms.
'Potentially any of these could yield a profitable return on investment of between S$300 and $S500 sqft in 12 to 18 months from the time of purchase,' Mr Tan says. However, it seems that buyers are not necessarily looking for a quick return on investment. 'Many foreigners - especially the British, [other] Europeans and Australians are looking for somewhere they can potentially live. They have much confidence in Singapore for its stable government, its reputation for security and efficiency, and its educational and medical facilities. It is viewed as a good place to settle down long term.'