How has the COVID-19 pandemic, which has led investors globally to brace themselves for turbulent economic conditions as the virus ravages economies worldwide, affected the luxury residential segment in Singapore? It appears that the luxury high-rise residential market in Singapore remains a harbour amid the storm, bolstered by the resilience of homes in the Core Central Region where high-end living continues to maintain its lustre.
Do investors need to worry about how the pandemic will affect the luxury residential segment in Singapore?
In the past, luxury living in Singapore mainly comprised the traditional prime districts of 9, 10, and 11. However, in the past 15 years or so, the definition of luxury living has extended to the concept of city living and island living. In addition to these prime districts, the Core Central Region also encompasses private residences in the Downtown Core (Districts 1, 2, 6, 7) as well as Sentosa Island (Southern Islands Planning Area) and is home to some of the most expensive addresses in Singapore. These are preferential locations for high-net-worth individuals (HNWIs) where the different distinctive characteristics cater to diverse luxury lifestyles.
The Three Luxury Residential Enclaves — Traditional Prime Districts, City-Living, and Island-Living Singapore’s Districts 9, 10, and 11 have long been synonymous with the status of luxury living in the city-state. The prestige of the traditional prime districts is apparent. Well-known personalities invested and established their homes in the region, with District 9 boasting celebrities like Facebook co-founder Eduardo Saverin and movie star Jackie Chan, who both own units in The Orchard Residences. All eight resale transactions in the opulent development in 2020 surpassed the SGD 5.5 million mark (approx. USD 4.18 million), at average prices above SGD 2,500 per square foot (psf) (approx. USD 1,889).
Luxury living in Singapore now includes city living and island living.
Besides the traditional prime districts, homes in Singapore’s Downtown Core are also highly coveted due to their strategic location at the heart of the financial district and characterised by city-living. Iconic residential projects that distinguish the Downtown Core include the flagship mixed-use development Wallich Residences, which sits at the pinnacle of Singapore’s tallest building and offers luxury units from a panoramic 180m.
Record high selling prices of its five palatial penthouse units have thrust the development into the spotlight. Aside from the well-known sale of the sole 21,108 square feet (sq ft) super penthouse to James Dyson at a whopping SGD 73.8 million (approx. USD 54.8 million) and the subsequent resale to Indonesia-born tycoon Leo Koguan for SGD 62 million (approx. USD 46 million), a Taiwanese homebuyer forked out SGD 17.5 million (approx. USD 13 million) in January 2020 for a 3,509 sq ft penthouse on the 61st floor, translating to an astronomical SGD 4,987 psf (approx. USD 3,703).
For individuals that prefer a lifestyle away from the hustle and bustle of the city, homes in Sentosa Cove provide the allure of island and resort living in a metropolis and are known as the only place where foreigners can enjoy the privilege of owning landed homes.
The land is scarce in the 117-hectare island of mostly reclaimed land, and the enclave remains the exclusive home to around 2,000 or more residential units — 80 per cent of which are condominiums. While prices and activity have since tempered down in the resort island, there is still life yet with several high-value resale transactions materialising. A case in point is the Marina Collection, where six condominium units were sold in 2020, out of which four were above SGD 6 million (approx. USD 4.45 million).
Resilience in the CCR
Buyers’ interest in luxury homes in the Core Central Region has historically been strong and this location seems poised to ride out the storm even as Singapore faces the uncertainties of a crisis. In the Core Central Region, non-landed transaction volumes in 2020 amounted to 2,998 units, exceeding the 2,695 sales (excluding Executive Condominiums – ECs) recorded in 2019 (based on data available as of 1 February 2020). While total sales volumes saw a dip from March to May 2020 corresponding to the hike in the number of COVID-19 cases, the number of transactions in the Core Central Region bounced back from June (Exhibit 1 below).
Prices of prime properties in Singapore fell marginally in 2020. The index by the Urban Redevelopment Authority of Singapore (URA), which tracks price movements of non-landed properties in the Core Central Region segment, showed a surprising uptick of 3.2 per cent quarter-on-quarter (q-o-q) in Q4 2020, and overall in 2020, prices in the Core Central Region declined by a slight 0.4 per cent even though the year was rocked by pandemic-driven uncertainty.
Source: Knight Frank Singapore
New launches of luxury residential projects in the Core Central Region propped up prices and activity even as containment measures disrupted real estate activity. The launch of the residential project The M in Singapore’s Downtown Core led to a visible spike in transaction volumes in February 2020, as 354 units were transacted in the month alone at an average price of SGD 2,442 psf (approx. USD 1,813).
The traditional prime districts of 9, 10 and 11 also remained the most popular and resilient enclave during the crisis. Transaction volumes in these districts recovered steadily after the circuit breaker with more than 200 units changing hands each month in Q3 2020, exceeding the monthly average of some 190 units in 2019. Launches in 2020 such as 19 Nassim, Dalvey Haus and The Avenir transacted at average unit prices upwards of SGD 3,000 psf (approx. USD 2,227).
Source: Knight Frank
While interest in luxury residences by foreigners was dampened due to the travel restrictions that limited actual physical viewings, the proportion of total units purchased by foreign buyers for 2020 nevertheless managed to hover around the 10 per cent mark. Nevertheless, as prices in the Core Central Region have not increased in a substantial manner in 2020, foreign homebuyers could possibly increase in the region once the pandemic is in retreat and travel restrictions ease.
A stable haven
The seemingly indomitable stability of the Core Central Region market might seem largely incongruous with the ongoing pandemic. One reason could be that COVID-19 fears have emphasised the strong and enduring economic fundamentals governing Singapore, a break in the clouds that pushed some of the world’s mega-rich to set up here. Singapore has also been cementing its relevance as a wealth management hub and the number of family offices in the country has grown five-fold between 2017 and 2019. The pool of HNWIs that this attracts is ideal for the luxury residential market.
Singapore was also ranked as the most liveable city for expatriates from other Asian markets for the 15th year running in 2020, for its excellent infrastructure and amenities, low crime rate and a large expatriate community, which provides access to a social network.
Once Singapore is able to progressively open green lanes of travel to selected countries and mass COVID-19 vaccinations are deployed, the sale of luxury high-end residential units is expected to improve in 2021. And despite the persistent looming pall of the COVID-19 pandemic, global investors continue to regard Singapore as a safe destination for investment in the form of residential homes.
Leonard Tay
Head, Research
Knight Frank Singapore
Leonard Tay provides real estate market research and advisory services to clients. He has more than 10 years of experience in the real estate industry, primarily in the areas of cross-sector market research, consultancy advisory, tenancy administration. Leonard spent more than seven years with CB Richard Ellis researching all sectors of the Singapore real estate markets, three-and-a-half years in Colliers International, and three years in the Housing and Development Board. He has also lectured real estate subjects in Ngee Ann Polytechnic and at the Singapore Institute of Surveyors and Valuers. Leonard has participated in numerous consulting assignments –including market studies and due diligence advisory, development and financial feasibility studies, investment strategy, and occupier portfolio studies.
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