Luxury residential prices feel the pinch in Singapore

Prices grew a modest 0.9 % over first quarter of 2011 compared to 5.5 % for the rest of Asia.

The CB Richard Ellis Asian Luxury Residential Capital Value Index rose by 5.5 per cent quarter-on-quarter in the first quarter of 2011, well up on the 0.9 per cent registered in the previous quarter. However, most markets including Beijing, Shanghai and key South East Asian cities recorded a lower rate of price growth as sales slowed, following the introduction of measures directed at cooling residential property markets.

Hong Kong and Guangzhou were the only markets to see the growth of luxury residential prices accelerate quarter-on-quarter. In Hong Kong, luxury residential prices surged by 14 per cent quarter-on-quarter following a very flat fourth quarter of 2010 as the impact of the Special Stamp Duty introduced in November 2010 on all sales with a holding period of less than 24 months rapidly faded. In Guang Zhou a number of high quality projects were launched in prime areas during the quarter and pushed overall prices higher.

In Singapore, cooling measures announced in January, including the higher seller’s stamp duty and a reduction of credit availability to those who already have outstanding mortgages, started to take effect in the first quarter. The price growth of luxury homes in the Core Central Region moderated to 0.9 per cent quarter-on-quarter whilst sales volume was also down by 20.4 per cent. Rents remained basically unchanged but appeared to show signs of softening towards the end of the quarter along with the slowdown of expatriate leasing demand.

Overall prime rents in Asia continued to trend upwards in the first quarter of 2011 and the CBRE Asian Luxury Residential Rental Index rose by 2.3 per cent quarter-on-quarter.

Expatriate leasing demand was particularly strong in the key cities in Greater China including Hong Kong, Beijing and Guangzhou as multinational corporations continued to expand. In contrast, rental growth in South East Asian markets including Bangkok and Kuala Lumpur remained stagnant as slow corporate expansion resulted in limited demand in markets which have already been suffering from a large quantum of vacant accommodation.

Commenting on the outlook of luxury residential markets in Asia, Anton Eilers, Executive Director, CBRE Residential, Asia said, "Home buying demand is expected to remain healthy as the regional economy continues to expand. The cooling measures introduced in a number of major markets will moderate price growth of luxury residential property over the course of the year. Prices and rental growth in most South East Asian cities are expected to remain stable."

Joseph Tan, Executive Director, Residential said "It will be more realistic to expect the luxury
market to cruise along like it did in 2010. Although more foreign and permanent resident buyers have bought new properties in the prime residential districts in 2009–10, the numbers were less than in 2006–7, during the early stages of the development of Marina Bay as a global financial centre and the construction of the two integrated resorts. In the absence of similar government initiatives in 2011, we can expect minimal growth in both the inflow of foreign investors and home prices. As such, the volume of luxury transactions in 2011 is likely to be around 150-200 units with prices averaging at $3,000 psf and $ 3,500 psf for resale and new projects respectively."