Going back to first quarter of 2016, when the most recent deferred payment scheme (by OUE Twin Peaks) was re-introduced to the private residential market, it was initially met with skepticism. However, since then many property analysts have said that it was the re-introduction of the deferred payment that invigorated the luxury high end non-landed residential segment of the market. It took the market by storm with an overwhelming acceptance the payment scheme to the surprise of many. Moving on, the success of such payment plans have become a norm and is slowly being tweaked in many other areas by the different developers in the Core Central Region (CCR) and they too were met with good response by the market.
Subsequently, there was a decline of new residential property projects in the luxury segment and with many developers unable to provide such deferred payment schemes, the high-end market entered its next phase. It was the bulk sales, either structured or unstructured, these transactions then began with bulk purchase of the development company that owned the remaining residential units at the project, Starlight Suites, in River Valley Close. After which, the developers began with more creative ways such bulk sales with the Profit Participation Securities (PPS) scheme for Nouvel 18 on Anderson Road. In fact, such bulk purchase deals stayed on and kept interest in the high-end market at strong levels and the market was on edge with talk of which deal would be next.
That BIG bulk purchase deal
The one deal that turned heads and we believe also marked the recent high point of the CCR non-landed private residential market was the purchase of the remaining 45 units at The Nassim by banker Wee Cho Yaw. The deal size of S$411.6 million translates into a price of about S$2,300 psf. Prima facie, the price appeared on the low side, but if one tops back the bulk discount of 18 per cent, the price is a fair reflection of value in the area.
Although the authorities have closed the avenue whereby residential properties could be sold with minimal stamp duty payable via the sale of shares in a corporate entity holding residential property, the market sentiment in the high-end sector had already turned positive following the series of bulk sales.
While market watchers have been busy bantering over the direction of the high-end non-landed market, they have failed to, or at least not openly discussed, why ultra-sophisticated buyers are taking a fresh position in the high-end residential market here.
Although returns from a sample of developers’ weekend sales suggest that market sentiment improved after the government’s surprising tweak to the seller’s stamp duty and recent enhanced deferred payment schemes offered by developers may have uplifted sales in certain projects, in general, buyers may still need some convincing for them to overcome their inertia. After all, many who buy into the luxury end of the market are either overseas nationals or locals buying for investment, for whom the main stumbling block to a transaction is the high additional buyer’s stamp duty. As this raises the cost of entry, marketing strategies are becoming even more important; without a focused and sustained marketing effort, activity will fall back into slumber.
Ultimately, assuming that developers and agents play their roles well this year, which we believe they will, we are of the opinion that overall prices for non-landed properties in the CCR may still eke out a return. Not high, but still a good enough turnaround of a 1-3 per cent price gain.