How luxurious are the super luxury properties?
One of the characteristics of these luxury properties is that they are very spacious, usually starting at 6,000 sq ft, such as Les Maisons Nassim on Nassim Road.
Another example is the superb penthouse flats at the Newport Residence project in Tanjong Pagar, which is currently under construction, with 13,000 sq ft and a private infinity pool.
At 6,000 sq ft, it is approximately the size of five five-bedroom government HDB flats.
Using Boulevard 88, a freehold luxury condominium on Orchard Boulevard, as an example, the Business Times suggests that, assuming a 5% annual increase in unit prices, a unit currently priced at $5,500 will increase to $7,000 in five years, and predicts that more super-luxury condominiums will soon change hands at $6,000 per square foot, and even $7,000 to 8,000 per square foot.
The Business Times also analysed the reasons driving the price of super luxury apartments.
1. Singapore is a haven for the rich in Asia and the rest of the world. Singapore's political stability, rule of law society, transparency, social cohesion and strong currency are all factors that attract the wealthy to come and buy property. Foreigners can purchase private non-landed properties in Singapore, but they must pay Buyer's Stamp Duty and an Additional Buyer's Stamp Duty of 30%.
2. Singapore is located in a region where wealth creation is significant. Even though China's economy may not grow at near double-digit rates again, it is believed that there will be many wealthy individuals creating wealth in the world's second largest economy. The economies of the two most populous countries, India and Indonesia, are also likely to grow in the next few years, creating more millionaires and billionaires and further driving demand for luxury homes in the country.
3. Singapore's position as a wealth management hub has attracted many foreign tycoons to open family offices here and move their companies and investments to Singapore under the Global Investor Programme, thereby gaining permanent residency. The Singapore lifestyle is attractive to permanent residents, but permanent residents are not allowed to buy landed homes locally, making luxury condominiums their preferred choice.
4. Affluent individuals from different sectors may acquire rare and well-located luxury homes in global cities based on their lifestyle and investment needs, and Singapore's top-end residences may be one of their targets.
5. Rare is precious: most of these luxury properties are located just a few streets west of Orchard Road, and it is the finest units in this narrow area that the wealthy are targeting.
What is the impact of overpriced luxury properties on the overall market?
The number of luxury properties changing hands at sky-high prices, while certainly notable, is still quite small, so even though the impact on the prices of other private properties in prime locations is not expected to be significant, private properties on the fringes of the city and in the suburbs are even less affected.
An estate agent interviewed by property platform Stacked Homes noted.
"These buyers are rare, and they are buying ultra-luxury properties. They are not competing with Singaporeans in other Central Region (RCR) and Out of Central Region (OCR) areas to buy private homes for the masses. Even if all these ultra-high net worth buyers disappeared the next day, the price of local private homes for the masses would not fall." (Note: The country's land is divided into three main zones: Core Central Region (CCR), Other Central Region (RCR), and Outside Central Region (OCR) - CCR is the local core of prime real estate, covering the Central Business District and the postal districts 9, 10, 11 and Sentosa. ("OCR".)
In addition, these luxury properties are a source of taxation. In addition to the substantial stamp duty, homeowners have to pay $44,000 per annum in property tax for a luxury house with an annual value of $200,000 and $61,000 per annum if they rent out a luxury house with the same annual value.
Luxury projects are also more profitable than the average residential project in the local market, so property developers are able to make a profit.
The impact on the overall market will be minimal and will increase tax revenue and profits for developers. The higher prices of luxury private homes may not be worth worrying about.
