Luxury Homes Go Under the Hammer in Singapore

More and more prime properties are being put up for auction in Singapore as a number of tough government cooling measures hit in one of the world’s most expensive real estate markets. Foreigners have flocked to Singapore in recent years to snap up luxury homes, part of a broader property boom that saw private house prices skyrocket more than 60% between 2009 and 2013. Upmarket districts such as the man-made island resort of Sentosa—billed as Singapore’s answer to Monte Carlo—and Orchard Road, a swanky downtown boulevard, have long been a huge draw. However, rising property prices caused unease among Singaporeans, and prompted the government to introduce several rounds of measures since 2009 to slow the market and make it harder for foreigners to buy. Singapore’s home prices fell last year for the first time since 2008, during the global financial crisis, and the luxury property sector was particularly hard hit. The trend is clear from the spike in the number of high-end homes going under the hammer—117 were listed for auction in 2014, more than double the 54 listings in 2013, according to consultancy Colliers International Singapore. “There is already an emerging trend of such properties being put up for auction,” Colliers’s research director Chia Siew Chuin told Mansion Global. “Against the backdrop of a tightened credit environment, more high-end properties may be put up for auction this year.” The main measures introduced by Singaporean authorities were an additional buyer’s stamp duty and a decision to cap borrowers’ total loan obligations at 60% of their monthly income, making it harder for buyers to obtain mortgages. Property taxes for foreign buyers now stand at 18%—after the government imposed a 10% additional stamp duty on foreign buyers in late 2011 and raised it further to 15% just over a year later on top of a basic buyer’s stamp duty of about 3%. Singapore posted the biggest decline in prime residential prices in 2014 among major cities around the world, down 12.4%, according to consultancy Knight Frank. Singapore’s overall home prices fell 4% in 2014, according to official data. Prices continued to fall, at 1%, in the first quarter this year. A separate Jones Lang LaSalle research report also showed Singapore was the worst-performing luxury market in Asia Pacific last year, trailing Hong Kong, Beijing and Shanghai. Alan Cheong, head of research at broker Savills Singapore, forecast that prime residential prices would continue falling by 5% to 10% in 2015, amid soft buying sentiment and external factors such as China’s crackdown on corruption. About one-third of Singapore’s luxury property transactions are from overseas buyers, including the rising number of millionaires in China, according to Cheong, making the segment more vulnerable to government policies in other countries. The outlook is not all gloomy. Prices are holding up well in some areas. Two new luxury buildings popped up in one of the city’s most popular neighborhoods, the upscale District 10. A 2,239-square-foot unit at D’Leedon, designed by renowned Iraqi-British architect Zaha Hadid, was sold for 3.39 million Singapore dollars in February, or about US$2.5 million. A similar unit sold for S$3.35 million in November 2014, Singapore’s Urban Redevelopment Authority data showed. The other development, the 381-unit Leedon Residence—which boasts a recreation area packed with lush greenery, a nature trail and a pool—also saw its median per-square-foot price up slightly from S$1,814 in April last year to S$1,839 in February, according to the Urban Redevelopment Authority. Some analysts said they were optimistic that the luxury segment will regain its momentum gradually, as buyers looking for bargains slowly return to the market. “Transactions could improve as buyers who have previously waited on the sidelines return to seek out opportunities for value buys in the market,” Chia from Colliers International said.