Rents of luxury homes surge in Q1 despite wider market slump

The agents reported that the rents of large luxury homes increased in the first three months, despite the overall market slump, due to a limited supply and high demand by foreigners.

The demand for four-bedroom private non-landed residential units has increased 36.5% compared to last year’s fourth quarter.

In this segment, leasing demand was up 19.3 per cent on the year in the report released Thursday (May 2nd).

Rents on high-end units with four bedrooms increased by 6.5% in Q1 and averaged S$17.467 per month. This is up from S$16.396 per month in Q4 of 2023.

The agency’s luxury properties basket tracks residential units within the Core Central Region (CCR), valued at S$5,000,000 or more, with a strata of at least 2,004 square feet.

Rents in the larger luxury units have declined since the third quarter of 2023. The latest Urban Redevelopment Authority statistics released last weekend show that overall market rents decreased by 1.9 per cent during Q1. This is a continuation of the decline of 2.1% in the prior quarter.

Due to the geopolitical turmoil, more wealthy foreigners are moving to Singapore.

This is probably also due to the limited number of units.

Huttons estimated that luxury home rentals in Q1 of 2024 would be 569, 3.6% higher than the Q4 figures but 2.6% less year-on-year.

In Q1, rental demand was greater for Seascape, The Orchard Residences or The Residences at W Singapore Sentosa Cove.

The demand for such developments as Boulevard 88 15 Holland Hill, and Leedon Green may also increase.

The projects are all brand-new, and have larger units with more square footage.

The mass market rental is adversely affected due to economic uncertainty and the influx of new homes. Luxury rental is doing better due to the scarcity of larger apartments, which will continue to drive rental prices up.

Some foreigners may have bought homes rather than rented. But the additional buyer’s stamp duty (ABSD) increase in April 2023 continues to choke foreign buyers and push them toward renting.

Expats and co-living operators seem to drive the rental demand for units with three or four bedrooms.

Renting larger units is difficult, because most people tend to buy three and four-bedders for their own use.

Supply will be limited with fewer new launches of CCR four-bedroom or larger units.

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A high price limit the number of buyers and discourages many developers from building bigger units.

In its report, the Luxury Sector, it suggests that sales on the high-end markets are also improving.

In Q1, total sales on the resale markets were S$282.9million. This was 4.2 percent higher than the quarter prior. For Q1, the estimated volume of transactions was 46 units. This is 34.3 percent lower than that in Q4.

Watten House was the new project that accounted for the increased volume. After removing the impact of Watten House’s sales, Q1 volume was 40 transactions, which is 17.6 per cent more than quarter-on-quarter.

Singapore has become a haven of safety for many buyers due to the increased geopolitical turmoil.

CCR’s price growth in Q1 was higher than that in other regions. Prices in CCR increased by 3.4 percent, compared to gains of 0.3% and 0.2% in Rest of Central Region (RCR) and Outside Central Region (OCR), respectively.

Private home prices increased by just 1.4 per cent overall in Q1, compared with a 2.8 per cent rise in the preceding quarter.

Home sales in CCR continue to be driven primarily by the local market. This is especially true after the ABSD tightening measure was implemented in April 2023.

Foreign purchases have fallen to 3.5% of non-landed home sales in the CCR for Q1 2024. This is down from 5.8% in Q3 and 5.6% in Q4 2013.

The foreign buyers’ interest in residential property will remain muted due to the 60 per cent ABSD rate.

During the peak of luxury, the segment Good Class Bungalows (GCBs) saw only five GCBs transacted, which is similar to Q4 2020.

Data shows that the value of GCBs in the first quarter was S$118.4million, or 10.6percent less than it was the previous period.

Amid an uncertain economy and rising interest rates for longer, buyers did not want to pay a large premium to buy a GCB. As a result, the first quarter was quiet.

The largest GCB transaction by value was at 15 Ford Avenue. This property was sold for S$39.5m to a scion in the family of Wee Chu Yaw.

Tenant opposition is keeping GCB rents in check. GCBs that had asking rents below S$30,000 are still preferred by tenants who remain cautious. Tanglin Hill had the best deal with a monthly rental of S$120,000.

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