Rents for luxury private homes jump in Q1 amid market slump

Agents said that rents for large luxury homes rose in the first quarter despite a general slump in the market. This was due to the limited supply of high-end properties and the demand from foreigners with high net-worth.

According to the analysis, the demand for private non-landed four-bedroom residential units increased by 36.5% in the first quarter compared to the fourth quarter in 2023.

The report published on Thursday, May 2, showed that the leasing demand in this segment is also 19,3 percent higher than it was last year.

Rents for four-bedroom luxury units increased by 6.5 percent in Q1 from S$16.396 in Q4 2023 to S$17.467 on average per month.

The basket of luxury property is a collection of residential units located in the Core Central Region, valued at S$5,000,000 and above and having a minimum strata area size of 2,000 square foot.

Rents on the market have fallen since the fourth quarter of 2023, despite the fact that transactions for luxury properties are increasing. According to the latest Urban Redevelopment Authority figures released last week the overall market rents declined by 1.9 percent in Q1, continuing the decline of 2.1 percent in the previous quarter.

It is possible that the higher demand for four-bedroom apartments may be due in part to geopolitical tensions causing more foreigners with high net worth to relocate to Singapore.

The limited availability of these units is also likely to be the cause.

Huttons estimates that the rental volume of luxury homes will be 569 units in Q1 2024, which is 3.6 percent higher than Q4 but 2.6% lower compared to last year.

Rental demand for projects such as Seascape Residences, The Orchard Residences, and The Residences of W Singapore Sentosa Cove was higher in Q1.

Demand could increase for developments such as Boulevard 88 and 15 Holland Hill.

These are brand new projects with larger square footage and bigger units.

The mass rental market has been adversely affected more by the economic uncertainty, and a flood of newly completed homes. The luxury segment, on the other hand, is doing well because of the lack of larger units. This is expected to support rental price growth.

Some foreigners might have considered buying a home instead of renting. The April 2023 Additional Stamp Duty (ABSD), however, continues to put foreign buyers under pressure, forcing them to rent instead.

The demand for rental units with three and four bedrooms appears to be primarily driven by expatriates, and operators of co-living.

There are also fewer larger units available for rent, as most three- and four bedders are purchased by owners.

The supply of four-bedroom units and larger will remain limited as fewer launches are planned in the CCR.

Many developers are discouraged from building larger apartments because of the high price.

It was suggested in its report on luxury that the sales of high-end products were also improving.

In Q1, the total value of sales in the resale sector was S$282.9million, a 4.2% increase over the previous quarter. The estimated transaction volume for Q1 was 46 units, which is 34.3% lower than Q4.

The higher volume was due to the sales of Watten House, a new project. If you remove the sales at Watten House, then the Q1 total volume is 40 transactions or 17.6 percent higher than the previous quarter.

Singapore is a safe haven for buyers who are reportedly motivated by the increased geopolitical tensions.

Find out more: Emerald of Katong Singapore

In Q1, the CCR saw a higher price increase than other regions. The CCR saw a price increase of 3.4 percent, which was higher than the gains of 0.3 and 0.2 percent in the Rest of Central Region or Outside Central Region.

In Q1, the average price of a private home rose by 1.4 percent, compared to the 2.8% increase recorded in the previous quarter.

The local market continues to drive CCR home sales, especially after the ABSD measures are tightened in April 2023.

In Q1 2024, foreign buying fell to 3.5 percent of all non-landed private homes transactions in CCR – down from 5.8 percent in Q3 2023 compared with 5.6 percent in Q4 2023.

We expect the foreign buyer interest to be relatively low, given that foreigners are penalized by a 60 percent ABSD on residential properties purchased.

In Q4 2023, at the height of the luxury market in the Good Class Bungalow segment (GCB), only five GCBs had been transacted.

The total value of GCBs purchased in Q1 was S$118.4 millions, which is 10.6 percent less than the previous quarter.

Due to an uncertain economic climate, and interest rates that have been higher for longer, buyers were reluctant to pay a premium price for a GCB. This resulted in a quieter first quarter.

The biggest GCB deal in terms of quantum was 15 Ford Avenue. It was sold to a scion from Wee Cho Yaw’s family for S$39.5million.

Tenant resistance keeps GCB rental prices in check. Tenants still prefer GCBs whose asking rents are below S$30,000, because they remain cautious and do not want to pay high rental prices. Tanglin Hill was the top deal, with a rent of S$120,000 per month.

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