In the top league

In the top league
March 23rd, 2007

Nicholas Mak and Michelle Tee look at how Singapore’s luxury properties compare with those in other global cities

As Singapore’s high-end homes reach ever higher prices it may be illuminating to see where the city now stands in relation to the major capitals of the world, and what lies in store for these gateway cities in 2007.

One word encapsulates the phenomenon of record-breaking prices for top-end residential property in major cities including Singapore - globalisation. It has transformed some into global cities, where international business and financial institutions, law firms and corporate headquarters cluster, creating a business environment with buzz.

As these global cities continue to nurture a growing pool of wealthy local individuals and a sizeable inflow of high net worth international business people, investment bankers, traders and celebrities, the demand and, in turn, prices of high-end luxury residential developments in these cities would usually be the most expensive in that country or region.

Compared to a year ago, average prices of high-end luxury apartments have seen strong growth of about 10 per cent to 17 per cent in cities like Tokyo, Hong Kong, Beijing and Singapore. The price increase of high-end luxury apartments in London was even more spectacular, surging close to 30 per cent in the past year.

As such, prices of luxury residential properties in selected global cities now range from a relatively affordable S$350 to S$500 per square foot (psf) in Beijing to S$4,000 to S$6,000 psf in London and Hong Kong. Comparatively, prices of Singapore’s luxury properties, which average $2,300 psf, are still some way from the sky-high prices commanded in London and Hong Kong. But they are almost on par with Sydney’s and Tokyo’s.

Exclusivity, lifestyle and convenience are found to be the key features of high-end residential developments in global cities. In particular, tie-ups with branded hotels is a gradually growing trend in the luxury market, especially in cities like Singapore, Tokyo and London. This is to better offer residents an array of personalised hotel services. Examples of such joint propositions include St Regis Residences-St Regis Hotel tie-up in Singapore and One Hyde Park-Mandarin Oriental Hotel tie-up in London.

Notwithstanding this, standard condominium facilities such as swimming pool, landscaped gardens, shared multi-purpose function room, gym, BBQ pit, private carpark spaces and sometimes tennis courts that are commonly provided in Singapore’s luxury residential properties are not always offered to residents in other global cities, even in the high-end market.

London: Priced at a high

Some of the most expensive homes in the world can be found in London. Given a choice, a significant number of people would like to live in central London, but only a few can afford it.

On average, freehold luxury homes in London cost about S$6,000 psf to S$7,500 psf. Demand in London is not limited to people working in the city but also foreign home buyers from Europe, South America, the Middle East and Russia. They are attracted by London’s prime economic status, strong capital markets, lifestyle as well as favourable tax laws as compared to other European countries.

Tokyo: The environmentalist

Reflecting the general eco-friendly culture of the Japanese, developers of residential projects in Tokyo are space conscious even in the high-end segment. Typical units in a luxury development range from 500 sq ft to 1,900 sq ft, with some projects such as Banco Park House and Aksaka Tower Residence offering larger units of up to about 2,800 sq ft. In addition, recreational facilities such as swimming pool, tennis courts, gym and BBQ pits are almost non-existent in Tokyo’s residential developments. But some high-end residential developments such as The Centre Tokyo and Aksaka Tower Residence do provide unique facilities like libraries and guest suites, which are not usually found in other global cities’ luxury residential projects.

Average prices of high-end luxury residential units in Tokyo currently range from S$1,400 psf to S$1,800 psf, with some top-end developments such as Chidorigafuchi priced at about S$2,400 psf. But they are still considered reasonable compared to other global financial centres such as London, Hong Kong and New York.

Hong Kong: Space as status

Hong Kong’s high-end developments are concentrated in areas such as the Peak, Central, Happy Valley and Kowloon Tong. The majority of luxury units such as those found in 8-12 Peak Road and Grosvenor Place are large, at 2,500 sq ft and above.

Given that high-end projects in these areas can range from S$3,000 psf to over S$4,000 psf, potential home buyers need to have assets in excess of S$10 million to be able to purchase a decent luxury unit in Hong Kong. Swimming pool, clubhouse and private car parking spaces can be found in almost all of the high-end residential projects.

Beijing and Shanghai: Self-contained

Given the strong presence of Singapore developers in China’s property market, Beijing and Shanghai’s high-end residential projects have features similar to Singapore’s. One difference is that China’s residential projects tend to be on a larger scale to accommodate a bigger population.

Projects such as Central Park, Park Avenue and Grand Moma Residence in Beijing were constructed in three to four phases with the total number of units in the development ranging from 1,245 to about 1,800. Due to the sheer size of some of these developments, developers have made them self-contained with supermarkets, restaurants, bars and sometimes beauty salons.

The average prices of luxury condominiums in Beijing range from S$340 psf to S$470 psf. Besides standard facilities such as swimming pool, landscaped gardens, private carpark space and gym, larger-scale projects usually have additional recreational facilities. For example, Central Park in Beijing has a squash room and yoga room while Lakeville Regency boasts an indoor golf driving range.

Prices of luxury condominiums in Shanghai are among the highest in China, typically ranging from S$650 psf to S$1,000 psf. Currently, Tomson Yipin, located in the Pudong Lujiazui Riverfront Area in Shanghai, is one of the most expensive high-end residential projects in China. The average asking price is S$2,400 psf but to date only three units have been sold since its launch in 2005.

Sydney: Concierge, concierge, concierge

Similar to Singapore’s Ardmore Park, some luxury developments in Sydney such as Macquarie Apartment and Greenclift also offer homogenous-sized units of three bedrooms or four bedrooms to enhance the exclusivity of their developments.

Average prices of units in such high-end developments range from S$2,000 psf to S$2,900 psf, a level that is close to Singapore’s top-end homes. Landscaped gardens are not usually a feature in luxury developments located in the CBD area but swimming pools, gym, private carpark spaces and concierge services are a must.

What next?

While high-end property markets in most of the global cities have already enjoyed a bull run in 2006, they are not expected to see a correction this year, as global economies stay healthy.

Moreover, with the continual growth in financial services, wealth generation and flow of high net worth individuals across international borders, demand for high-end homes is unlikely to abate in the short term. A more likely scenario is that the rate of price growth will moderate, especially in cities that have already seen record price growth.

On the whole, Singapore and Hong Kong’s high-end residential properties are expected to show the strongest growth in 2007, rising by 15 per cent to 20 per cent while in other cities like Tokyo and London, high-end prices are predicted to grow by a relatively slower 10 per cent to 12 per cent.

In the case of Sydney, the price growth of high-end residential properties in 2007 is expected to be in the moderate range of zero to 5 per cent as the broader market has been depressed over the past two years and the high-end market had only begun to show signs of bottoming out last year.

On the other hand, due to the Chinese government’s effort to cool the property market in China, the growth rate in Beijing’s high-end residential market will slow to under 10 per cent while prices of Shanghai’s high-end apartments will likely record negative growth of 3.5-4 per cent in 2007.

Nicholas Mak is a director and Michelle Tee an analyst at Knight Frank

Source: The Business Times, 22 March 2007

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