Fewer than expected takers for high-end homes?

By The Folks @PropTalk - August 19, 2010 No Comments

The ST today reported that buyers are still showing relatively muted interest in the most luxurious homes in the city centre, as the latest set of new home sales data shows.

But they are making a beeline for very popular mass market homes, followed by mid-tier units, the figures show.

Property experts say the outlook for the luxury sector remains favourable, though growth has slowed and current global uncertainties mean these prime high-end homes are unlikely to rebound this year as some experts had hoped.

A few months back, it was expected that luxury projects such as Ardmore 3 and those on the former Grangeford and Parisian condo sites in the Orchard area would be launched in the first half year.

No major luxury projects were launched last year.

Developers of these homes have been cautious again this year. Bukit Sembawang recently said it will be launching the marketing of Paterson Suites in its current financial year ending March 31 – unusually late in the game for a project that has already received its temporary occupation permit.

Underscoring the point, City Development Chairman Kwek Leng Beng last week said luxury homes had not sold as well as the industry had expected. He said this segment would perform well – perhaps next year – only if the wider global economy stabilises.

While the prime segment (homes selling for $2.5 million to $5 million) saw some activity in the first half, transactions in the luxury ($5 - $8 million) and super-luxury (above $8 million) segments have been rather scarce, said CBRE executive director (residential), Mr Joseph Tan.

“Most homebuyers were generally more cautious towards high-priced projects under the present uncertain conditions on the global front.”

Still, Colliers International’s director of research and advisory, Ms Tay Huey Ying said the price rebound in high-end and luxury properties, which started in the second half of last year, had continued this year, though the pace of growth has moderated to more sustainable rates.

“Developers are holding back their high-end and luxury launches because there has been some derailment in the strength of the economic recovery due to the euro zone crisis. There is also growing uncertainty in the recovery of the US economy. Prices are not yet at the levels they are aiming for.”

More investors are going for cheaper new properties – mostly those under $1,500psf – as global uncertainties have put a lid on risk appetites, said Ms Tay.

The slight slowdown means that price growth in the high-end and luxury segments is likely to come in towards the low end of the firm’s forecast range of 15 – 20% for this year, she said.

Experts note that in the first half year, the URA’s price index for non-landed homes in prime districts was already up 10%, and is just 1.8% off the 2008 peak. This is just a tad slower than the 10.3% and 12.9% price gains seen for non-landed homes in the city fringes and suburban areas respectively.

CBRE expects high-end home prices – still about 5 – 10% below 2007 boom levels – to be stable till year-end.

While the high-end prices are up this year, sales volume has not picked up significantly owing to fresh concerns on the global economic recovery’s sustainability.

But the number of high-end home deals of $3,000psf and above has risen from eight units in the fourth quarter to 29 units and 35 units in the first and second quarters respectively, noted Savills Prestige Homes director Steven Ming.

However, as high-end homes are very dependent on foreign demand, sales could recover to previous peaks in the next 12 – 18 months after macro-economic concerns have been sorted out, he said.

CBRE’s Mr Tan said developers have adopted a low-key strategy to marketing luxury projects, such as direct invitations for private previews and appointments.

For example, Far East Organization recently launched its luxury brand “Inessence”, and sold a handful of units in Boulevard Vue and Skyline @Orchard Boulevard. Wheelock Properties and Hong Leong Group sold a few units at their respective new super-luxury projects, Orchard View and Sage.

Mr Tan said there is a “strong likelihood” the high-end market will continue in this manner for the rest of the year.

However, the few possible high-end launches in September such as Twin Peaks and The Peak @Cairnhill will test the market’s receptivity. If these launches do well, it will motivate developers to launch more high-end projects, he said.


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