Luxury home rental rates rise in Q1 despite a wider market decline: Huttons Asia

Rents for luxury homes increased during the first quarter of 2018, in contrast to an overall slump across the entire market as demand from high-net-worth foreigners was met by a shortage of homes in the premium segment, according to agents.

Analysis by Huttons Asia showed that one market segment, in particular private four-bedroom residential units with no land which experienced an increase of 36.5 percent rise in demand during the first quarter, as compared to the fourth quarter of 2023.

Huttons report, published on May 2, showed that the demand for leases in this segment is also 19,3 percent higher than last year.

Huttons stated that the rise in the demand for four-bedroom luxury units drove rents up 6.5 percent in the first quarter of 2018, for an average of S$17.467 per month. This is compared to S$16.396 in Q4 2023.

The agency’s basket of luxury properties includes residential units in the prime Core Central Region (CCR) valued at S$5 million and above, with an area of strata that is at least 2500 square feet.

Market rents have been falling since the end of the fourth quarter in 2023, despite the fact that transactions for luxury homes are rising. According to the latest Urban Redevelopment Authority figures released last week the general market rents fell by 1.9 percent in Q1 continuing the decline of 2.1 percent in the previous quarter.

Mark Yip, chief executive director of Huttons Asia, said that the increase in demand for apartments with four bedrooms may be a result of a higher number of high-net worth foreigners moving to Singapore due to geopolitical tensions.

He added that the shortage of these units was likely to be the cause.

Huttons estimates that the rental volume of luxurious homes will be 569 units in Q1 2024. This is 3.6 percent more than Q4 and 2.6% lower year-on-year.

According to Yip, the rental demand for projects like Seascape Residences, The Orchard Residences or The Residences of W Singapore Sentosa Cove was higher in the first quarter.

Linda Chern of CBRE, the head of residential services at CBRE said that new developments such as Boulevard 88 and 15 Holland Hill, as well as Leedon Green, could also see an increase in demand.

“These are brand new projects with bigger square footage and bigger units,” she said.

ERA Singapore’s chief executive officer, Eugene Lim, observed that the private residential rental market is experiencing a divergence.

Mass rental is most adversely affected by economic uncertainty and the increase in new houses. The premium segment, on the other hand, is doing well due to the absence of larger homes. This is expected to boost rental growth, he said.

He added that previously certain foreigners might have looked to buying homes rather than renting. The April 2023 Additional Purchase Stamp Duty (ABSD), however, “continues a chokehold foreign buyers and encourages them to lease instead”.

Rental demand for three- and four-bedroom units appears to be driven by foreigners and co-living companies according to Wong Siew Ying, PropNex’s head of research and content.

She also said that the availability of bigger rental units is restricted because the majority of three- and four bedders are purchased by owners.

With fewer launches coming into the CCR offering four-bedroom or larger homes, the ERA’s Lim stated that supply will remain scarce.

He claimed that the prices are too high to accommodate the majority of buyers, and deter developers from building larger units.

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Sales up in high-end market

In their report on the luxury sector, Huttons suggested that sales in the luxury market were also growing.

The value of sales in the resale market stood at S$282.9 million during Q1, 4.2 per cent higher than the previous quarter prior to it. Transaction volume was estimated at 46 units for Q1, 34.3 percent lower than in Q4.

However, the higher volume from the previous quarter was due to sales from one new development, Watten House. In removing the impact of Watten House sales, Huttons put the total volume in Q1 at 40 transactions, or 17.6 per cent higher quarter-on-quarter.

The heightened geopolitical tensions appear to have enticed homeowners to invest in homes in the safe haven Singapore as per Huttons’ Yip.

In the first quarter of 2018 The CCR experienced a greater cost increase over other regions. The CCR was able to record a price hike of 3.4 percent, which was higher than the increases of 0.3 and 0.2 percent in the Rest of Central Region or Outside Central Region.

In Q1, the median price of a private home increased by 1.4 percent, compared to the 2.8% increase recorded in the preceding quarter.

CCR homes sales “continue to be driven by the local market, especially following the tightening of the ABSD measure in April 2023” According to PropNex’s Wong.

She also said that foreign buyers fell to 3.5 percent of all non-landed private homes transactions during CCR Q1 2024, down from 5.8 percent in Q3 2023 and 5.6% in Q4 2023.

“With the punishing 60 per cent ABSD rate currently in place for residential property purchases made by foreigners We expect foreign purchasing interest to remain relatively low,” she added.

Two new projects that are prime which include Newport Residences and Skywaters Residences – are expected to open within the next few months.

Huttons said that the most popular luxury non-landed residential properties included The Ritz-Carlton Residences. Ardmore Park was second and was then Watten House. Nassim Jade came third. The Laurels and The Ladyhill complete the list.

In Q4 2023, at the top of the market for luxury in the Good Class Bungalow segment (GCB) there were only five GCBs were sold.

Huttons information showed that the total amount of GCBs sold in the quarter of January was S$118.4 million, which is 10.6 percent lower than the previous quarter.

Yip reported that buyers were reluctant to pay a premium for a GCB because of the uncertain economic climate, and interest rates that are higher over a longer. This resulted in a quieter first quarter.

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

Tenant resistance helps keep GCB rental rates under control. Huttons claimed that GCBs with rents for asking that were less than S$30,000 were still preferred by tenants as they “remain cautious and prefer not to pay for high rents”. The best deal in Tanglin Hill was a S$120,000 monthly rental.

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