Singapore dreaming?

Singapore dreaming?
John Higginson


Singapore is embarking on a new era, according to Lee Kuan Yew, who made a headline-grabbing speech at a Chinese New Year dinner. “In the first phase we moved from the Third World to the lower half of the First World,” the Minister Mentor said, reported Today newspaper. “Now we can move into the upper half of the First World. We can do this in the next 10 to 20 years.”

Over the past 18 months, the city’s top-tier residential property prices have started climbing towards those seen in the likes of London, New York, Tokyo and Hong Kong. After last year´s record level of sales activity and a 25.4% price rise for uncompleted, non-landed properties in the Core Central Region (comprising districts 9, 10, 11, Downtown Core and Sentosa), the luxury condo market kicked off 2007 in much the same, spectacular fashion as it ended last year.

Following the feverish demand and high prices in December for the 428 units at Marina Bay Residences (averaging $1,950psf, including a record high S$3,400psf for a penthouse), there was similar enthusiasm for One Shenton, by City Developments Limited. Due in large to its prime location on the cusp of Marina Bay, 95% of the 341 units were sold within 1½ days at between S$1,500-2,200psf, crowning the first major property launch of 2007 and a nice start to the year for CDL, whose sales value of units sold and booked last year was 67% higher than in 2005.

Those two major developments combined, however, don´t match the sheer scale of Reflections at Keppel Bay, the latest launch by the Keppel Group in the Harbourfront area, facing Sentosa. Designed by American architect Daniel Libeskind, a staggering 1,160 homes will be contained within six glass towers and 11 villa apartment blocks along a 750m shoreline.

The second residential phase of Keppel Group´s waterfront precinct following the 969-unit Caribbean at Keppel Bay, Reflections will overlook the Sentosa Integrated Resort as well as Marina @ Keppel Bay, set to open later this year. It’s also an exciting time for the likes of Keppel Land, which sold a total of about 1,200 units in 2006, more than double the previous year´s tally.

“Prime waterfront properties appear to have emerged the star performers in the Core Central Region, having outperformed districts 9, 10 and 11 (Orchard Road area) in the last two years,” said Willy Shee, Chairman, Asia of CB Richard Ellis, one of Reflections´ two appointed agents along with DTZ Debenham Tie Leung (DTZ). “Compared to other gateway cities, though, such as London, New York, Tokyo and Hong Kong, Singapore certainly has more room to grow.” In Hong Kong, high-end residences can sell for S$5,000-$6,000psf.

Orchard still heart of high end
This year, over half of the private homes launched in Singapore will be in the traditional prime districts of 9, 10 and 11, and the new hot spots of Marina Bay (district 1) and Harbourfront (district 4). However, while the Marina Bay and waterfront condominiums have enjoyed a large slice of media attention in recent months, the Orchard Road area still retains its place as the heart of high-end living in the city.

The area is expected to be the centre of residential activity for the next few years, due to the government-led rejuvenation of the area and the frenetic activity by developers to secure prime real estate in the area. Of the 60 en-bloc deals recorded in Singapore last year (with a total value of S$7.5 billion, more than three times that generated in the previous year´s 41 deals, according to Savills Singapore), 39 were in the Orchard Road area. Between them, they could yield about 3,700 new high-rise homes, according to CB Richard Ellis.

This year, Orchard area prices are already topping the 3,000psf benchmark set last year by the St Regis Residences, by City Developments Limited. In February, a 2,034sqft three-bedroom apartment at The Boulevard Residence, by SC Global Developments, sold for S$3,205psf. It marked a new high for the Orchard Road area after surpassing the S$3,200psf figure set a week earlier by a unit at Beaufort @ Nassim, by HKR International.

A trio of new launches  The Orchard Residences, Parkview Éclat and The Marq on Paterson Hill  are expected to push the price bar even higher (see cover story). The condominiums´ respective developers  CapitaLand/Sun Hung Kai Properties, Chyau Fwu Group and SC Global Developments  all believe units, especially penthouses, could sell well over the S$3,000psf mark. SC Global expects its new Hilltops development in Cairnhill to sell at an average of S$2,500-3,000psf when it launches later this year.

Demand for residential properties is expected to remain strong in 2007 given the forecast of almost full employment, strong economic growth  the Government has upgraded its forecast to 4.5-6.5% from its earlier estimate of 4-6%  the low interest rate environment and the policy of attracting foreign talent.

Foreign interest
The growing number of foreign buyers has been arguably the major factor in driving up the prices of the luxury condominiums, both in terms of overseas-based investors and the new wave of foreign talent moving to Singapore. Of the record 24,233 transactions in 2006  34.9% higher than 2005 and 35.7% higher than the last peak in 2002  foreign buyers accounted for 23% of transactions, also a record.

About 35% of One Shenton´s buyers were from overseas. Significantly, non-traditional buying markets such as China, Russia, India and Middle East, all boasting emerging wealth, have become increasingly attracted to Singapore, complementing the usual key markets like Indonesia, Malaysia and the UK.

“Singapore has become a much more international marketplace, especially compared to 10 years ago, when it was predominantly a domestic market,” said Jeremy Lake, Director of Investment Properties at CBRE Richard Ellis (Singapore), who arrived in Singapore in 1991.

“There are many more international financial institutions and banks moving here, so many more people looking for high-quality housing. The people who initiated this market recovery are mainly people from outside Singapore. Generally, they are buying in the prime districts, as these are easiest places to rent out.

“The market is a bit sentiment-driven and when the sentiment is strong, people ignore the bad news. We have had a burst for the last 12 months, but it´s worth remembering property markets are cyclical. For seven of the last 10 years, the market has gone down and Singapore was stuck in the mud from 2000 to 2004.”

More foreigners than ever are buying into Singapore, yet a particularly significant trend is the percentage of foreigners buying high-end properties, the segment leading the market´s revival.

Indonesians were the dominant nationality among the foreigners who bought new, non-landed properties in the prime districts last year, followed by Malaysian, Britons, Indians, Australians, Americans and Chinese, according to URA statistics (see tables).

It´s interesting to note that Indonesians alone bought almost twice as many properties in 2006 (232) than the top 10 most active foreign nationalities in 1996 - Singapore’s property peak - bought between them, when Hong Kong buyers led the way with 37 units.

For the time being, there doesn’t appear to be any slowing down in activity in the luxury sector, with the Government and industry players talking down any fears of a bubble, citing the fact that significant sub-sales  used to gauge speculation  are limited to a certain sectors, not across the market (see Property Report´s interview with Jones Lang LaSalle, pages 18-21).

Overall, the development of the two integrated resorts have added excitement to the market and given confidence to investors. Singapore´s economy remains strong, while its standard of living, political stability and attractive business environment are luring more international businesses and foreigners by the day.

Furthermore, if the city-state is to achieve the 44% increase in population to 6.5 million, as stated by Mah Bow Tan, Minister for National Development, those extra numbers are going to have to come from outside Singapore, in light of the local birth rate. “There’s a big picture there, as this can only mean more foreigners will be arriving in the coming decades,” Lake says.

In his speech about Singapore moving up to the top tier of the First World, Lee Kuan Yew went on to cite the importance of Singaporean individuals and companies moving overseas to make their mark. It appears that the influx of overseas talent will be just as important in making this city a truly global player.