Sentiment in the luxury homes market continued to decline in the third quarter of this year after an anti-money laundering crackdown that made headlines in August. Mark Yip, CEO of Huttons Asia observes that the fall in luxury residential transaction volume comes amid ongoing investigations into Singapore’s largest money laundering case.
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The hike in additional buyer’s stamp duty (ABSD) rates that took effect in April, including the doubling of ABSD rates applicable to foreigners to 60%, has further eroded sentiments in the luxury homes market.
Research by Huttons Asia reveals that transactions of luxury homes dropped 41.3% q-o-q from 63 deals in 2Q2023 to an estimated 37 deals in 3Q2023. During the same period, luxury condo transactions clocked a total value of $295.8 million in 3Q2023, 50.9% lower compared to the $601.9 million racked up in 2Q2023. Subsequently, luxury condo sales for the first nine months of the year totals $1.82 billion across 222 transactions which is almost 25% lower than that of the same period in 2022.
The biggest luxury condo transaction in 3Q2023 occurred at Goodwood Residence, the 210-unit freehold development by GuocoLand along Bukit Timah Road. In September, a 10,710 sq ft penthouse at Goodwood Residence changed hands for $32 million ($2,988 psf). The seller, who had purchased the unit in June 2014 for $15.6 million, made a gross profit of $16.4 million on the transaction. The unit was sold to a Singapore permanent resident of Chinese nationality.
Activity in the Good Class Bungalow (GCB) market was also more muted. Only three GCBs are estimated to have been sold in 3Q2023, making it the lowest number of quarterly transactions since 4Q2013. The three GCBs were sold for a total value of $69.55 million, 82.3% lower q-o-q and 85% lower y-o-y.
Given the higher ABSD rates, Huttons believes that more foreigners may be choosing to rent while they seek to obtain permanent residency or citizenship status, underpinning heightened demand in the luxury rental market. Based on luxury condos monitored by Huttons, 701 luxury apartments were rented out in 3Q2023, 13.6% higher than the previous quarter. As a result, rents of luxury condo units edged up 1.8% in 3Q2023 on the back of the higher demand, with five-bedders seeing the biggest q-o-q surge in rents of 16.6% to reach $36,063 per month.
Rents of luxury non-landed homes were also up by almost 20% to $15,894 per month between January and September, and rental transactions of GCBs were up by an estimated 44.2% q-o-q. The GCB market witnessed the biggest rental transaction in 3Q2023, when a detached house in the Nassim Road GCB area was leased out for $120,000 monthly.
Yip predicts the luxury housing market may see a return in interest, noting that recent months have displayed a slight uptick in purchases of luxury condo units by foreigners. However, the level of transactions is unlikely to return to levels achieved before the ABSD hike, he adds.
The rental market may also be more subdued in the coming months, coming off the anti-money laundering operation. “After the arrests of money laundering suspects in GCBs, owners of GCBs are increasingly wary of renting their GCB to Chinese foreigners,” Yip says.