Demand for luxury homes is likely to remain buoyant this year, although rent returns on them have fallen from a 10.7 per cent peak in 1990 to around 4.3 per cent today, according to property specialists Marlin Land.
The drop in yield is a result of a 'shopping spree' by speculators that sent prices of luxury residences surging by 20 per cent in the past six months, executive director Ruyee How said.
'This drop is due to a strong appreciation in capital values amidst confidence in the investment market and somewhat slower rental escalation,' she said.
But investors were not over-concerned by falling yields when they were more than compensated by spiralling prices, she said.
The value of luxury apartments increased by an average of 29 per cent annually from 1990 to 1996.
'They are currently bought and sold at levels higher than those reached in 1994,' Ms How said.