Singapore's luxury residential market continued to weaken in the first half of 2023 as a result of the Federal Reserve's sharp interest rate hikes and a deteriorating macroeconomic backdrop, according to a recent research report. Transaction volumes for both premium townhouses (GCBs) and luxury condominiums declined in the first half of the year, reflecting the trend in the overall property market.

In the premium townhouses market, 13 premium townhouses with a total value of $525.3 million were transacted in H1 2023, down 14.4 per cent from H1 2022 (18 premium townhouses valued at $613.5 million), and down 30.1 per cent year-on-year from H1 2022 (29 premium townhouses valued at $751.42 million).

CBRE highlights that GCB prices remain firm, up 31.1 per cent compared to H2 2022, reaching $2,760 per sq ft in H1 2023.

In the luxury condominium market, 92 properties were sold in H1 2023 with a total transaction value of $964.7 million, down from 106 properties sold in H2 2022 with a total transaction value of $1,085 million.

While sales of luxury flats increased in the first four months of the year since China reopened its borders in early January, May and June saw a drop in sales from 27 April as the doubling of the Additional Buyer's Stamp Duty (ABSD) on foreign buyers to 60 per cent took effect.

However, despite the drop in transactions, prices remained firm. The average price of luxury condominiums rose 1.1 per cent from $3,425 per square foot in the second half of 2022 to 3,463 feet in the first half of 2023.

In Sentosa Cove, property sales also weakened compared to the second half of 2022. Seven Sentosa Cove townhomes valued at $139.4 million were sold in the first half of 2023, 32.8 per cent lower than the 10 townhomes valued at $207.5 million sold in the second half of 2022. For Sentosa Cove condominiums, 50 units valued at $251.1 million were sold in the first half of 2023, 29.8 per cent lower than the 74 units valued at $357.6 million sold in the second half of 2022.

The average price of both bungalows and condominiums in Sentosa increased in H1 2023 compared to H2 2022, with the former rising by 11.9 per cent to $2,214 per sq ft in H1 and the latter by 1.7 per cent to $2,063 per sq ft.

Looking ahead, transaction volumes in the luxury residential market are likely to remain subdued for the remainder of the year. This can be attributed to a number of factors, including ongoing cooling measures, an uncertain macroeconomic outlook, and rising interest rates, which may cause investors to take a wait-and-see approach.

However, existing luxury homeowners are likely to support market prices, as healthy rental yields and a limited supply of new luxury homes will incentivise them to retain their assets.