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High-end property market promising despite lack of foreign demand: Analysts

With a lack of new supply expected in coming years, some analysts say the prime segment could the first to benefit from a market recovery.

SINGAPORE: The private home market in the Republic is in the doldrums, with the prime residential segment especially quiet. However, with a lack of new supply expected in coming years, some analysts have said the prime segment could be the first to benefit from a market recovery.

One reason why high-end projects appear to have been hit hardest is the drop in foreign demand, due to measures such as the Additional Buyer Stamp Duty (ABSD).

The ABSD has had a disproportionate impact on foreign demand for Singapore property, since foreigners who are non-permanent residents must pay an additional duty of 15 per cent when they buy a home in Singapore.

In contrast, a Singaporean buying a second home pays 5 per cent, while permanent residents pay 5 per cent for their first residential property and 10 per cent for their second.

Property consultancy JLL estimated that foreigners now account for just 10 per cent of purchases in the central region - down from 20 to 25 per cent in 2011.

Said JLL's international director Karamjit Singh: "On one hand you have a disproportionate amount of new units in the upper end of the market that is ready to be completed, or ready to be occupied.

“On the other hand, you have measures that has brought down demand from foreigners and investors and these are the two large segments that used to buy high-end. So, a combination of these two has brought down volumes and naturally values.”

ANALYSTS STILL CAUTIOUSLY OPTIMISTIC

Despite the lack of foreign demand, analysts have remained cautiously optimistic about the high-end property market. They said prices are coming to levels which high-income earners could find attractive, and the oversupply is not as pronounced when compared with mass market homes.

"There is inventory in the high-end segment,” said Mr Chong Kang-Ho, BNP Paribas’ head of research for Singapore, Malaysia and Indonesia and ASEAN property research. “Having said that, in the next five years, the supply pipeline for high-end is actually very manageable.

“Especially if you compare it with mass market, which will account for a larger proportion of the supply pipeline to come. So in that aspect, we do see greater chance of high-end stabilising compared to the mass market."

Mr Singh added: "We still feel prices will trend downward, during the course of this year. But the positive that's taking place arising from the steady decline in real estate residential prices, is that it's taking place at the same time when wages are rising.”

JLL said prices of prime residential property could fall another 5 to 10 per cent this year, before seeing a recovery in 2017. 

SOME DEVELOPERS "CHOOSING TO WAIT"

Mr Singh also said some developers are taking the approach of “choosing to wait it out” if they do not have the luxury of time or the ability to hold on.

Meanwhile, developer GuocoLand said it is in no rush to sell. It is developing Wallich Residence at Tanjong Pagar Centre, which is expected to get its Temporary Occupation Permit (TOP) in the middle of this year. According to URA data, just 16 out of the 181 units have been sold to-date.

"We have not been actively marketing the residential component but one of the main reasons is because it is part of the apex of our tallest building in Singapore," said Managing Director of GuocoLand Singapore Cheng Hsing Yao.

“We are going to let the construction continue until it is close to completion, because we are putting in very high-quality design and finishes. At that point then we will start to market the project."