Overseas investors are the main drivers behind the city state's red-hot luxury homes market WHEN THE SALE of The Oceanfront, a new luxury condominium on Sentosa Island, opened to the public, buyers queued up hours ahead of the opening and snapped up 90 per cent of the 200 units released in 24 hours. The rush to buy reflects the red-hot state of Singapore's luxury property market. Chua Yang Liang, head of Jones Lang LaSalle research for Southeast Asia, said the high-end of the market rose 6 per cent to 7 per cent quarter-on-quarter in the second quarter of this year - well above the mass market, which rose only 1.5 per cent on average. 'As of the first quarter this year we were still on average 28 per cent under the last historical peak [in 1996] for the luxury market, so there is further potential growth for the Singapore market,' Dr Chua said, pointing out that Hong Kong by comparison was only 18 per cent below its 1997 peak. Foreign buyers have been the main drivers of the rise in luxury prices. Forty per cent of The Oceanfront units were bought by foreigners, mainly from Britain, Japan, Hong Kong, Malaysia and Indonesia. Meanwhile, interest from foreign buyers has helped make the St Regis Residences one of Singapore's most exclusive properties. Local buyers may have baulked at the average selling price of S$2,800 (HK$13,762) per sqft (which is more than double the S$1,300 per sqft asking price at The Oceanfront), but this did not deter overseas buyers - 65 per cent of the units went to foreigners. Tay Huey Ying, associate director, research and consultancy, Colliers International, said prices were affordable compared with luxury properties in the region. 'As at the second quarter, Singapore's average luxury home price was 13 per cent below that in Hong Kong and only a fifth of the average price level in Tokyo.' Investors could expect a return of 3.5 per cent to 5 per cent, she said. According to Jones Lang LaSalle Research, Indonesians and Malaysians were the biggest group of foreign buyers in Singapore's private residential market last year, representing 47 per cent of total buyers. Chinese and Indian buyers represented 9 per cent each and Hong Kong 3 per cent. Kwek Leng Joo, managing director of City Development, The Oceanfront developer, said: 'Singapore is becoming a property investment destination for many reasons, one of which, apart from the good quality of the projects, is that in pricing and cost we're still some distance from other major gateway cities.' The recovery of the high-end market started in late 2004 with the launch of The Sail @ Marina Bay, where units were snapped up by Hong Kong and mainland buyers. Property agents said prices had risen from S$950 to S$1,350 per sqft on the resale market since the launch of the first units. The resale trend recently accelerated when The Oceanfront properties were put back on the resale market within a week of the project's launch at prices that were S$100 per sqft above what was believed to have been paid, making owners a quick profit of about S$100,000 per unit. Dr Chua said that such investor actions pointed to more speculative behaviour, but said it was too early to say whether these anecdotal sales were enough to show a speculative trend. Given the nature of the high-end market, Singaporean developers are readying more properties. CDL is planning to develop another three high-end apartment projects around the prime Orchard Road area in the next two years, while its parent, Hong Leong Holdings, is expected to launch the 85-unit Tate Residence near Orchard Road later this year. The Tate has units ranging from 1,900 to 3,300 sqft, with two large penthouses each with their own lap pool. CapitaLand will soon start previewing its 73-unit Scott HighPark, a 27-storey block consisting exclusively of spacious apartments of more than 3,466 sqft called the penthouse series. Attention will also be focused on a joint auction on August 25 by Christie's Great Estates and Colliers International. Twelve plots for detached houses on Sentosa Cove, ranging from 643.5 square metres to 1,033.4 square metres, will be sold, and there is already strong interest for the prize plots in the southern part of the island. Property agents believe foreign purchasers will continue to drive the luxury home market. Ms Tay said: 'In the next six months, luxury property prices are forecast to increase by up to 10 per cent along with more new launches of high-end projects.' The mid-tier segment, which has already experienced positive spillover effects from the high-end segment, was expected to see appreciation in average price by between 5 per cent and 8 per cent in the second half of this year.