High-end properties lose some gloss, but long-term appeal remains

By Darius Cheung

Published: 4:15 AM, March 18, 2016

Singapore’s high-end property market took a beating last year as the Additional Buyer’s Stamp Duty (ABSD) continued to hurt sentiment. The ABSD imposes an extra 15 per cent tax on home prices for foreigners and this drove affluent foreign buyers to seek alternatives in the region, primarily in Hong Kong and Australia.

The overall view of Singapore’s luxury market remains negative for investors. A few signs of this are palpable: Luxury property prices have been falling since 2013, interest rates have risen and are set to go even higher, and there are escalating fears among expats that their housing allowances will diminish amid an uncertain global economic outlook.


According to the Real Estate Developers Association of Singapore, the prices of luxury property have slid by about 20 per cent from their peak in 2013. The ABSD has been pinned as the main cause of declining property prices: Foreigners now account for about 10 per cent of buyers in the Core Central Region, or city centre, down from 20 per cent in 2013. The worst hit area is Sentosa Cove — the only place in Singapore where foreigners can buy landed property without restriction and, as a result, accounts for the bulk of foreign buyers. Last August, we reported that Sentosa Cove properties had already seen price declines of between 18 and 36 per cent from 2011. This decline is set to persist until the ABSD is lifted — our view on this remains unchanged.

Most residential property loans are pegged to the Singapore Interbank Offered Rate (SIBOR), which has surged since end-2014, with the latest three-month rate at 1.2515 per cent.

The cause of this is the United States Federal Reserve taking steps to normalise interest rates for the US economy. In the aftermath of the global financial crisis in 2008, the Fed set its key benchmark rate target near zero, which in turn sent SIBOR rates to historic lows and fuelled Singapore’s property purchases. Last December, the Fed announced a rate hike of 0.25 per cent, with an eye towards gradual increases, effectively marking the end of cheap property loans here. While affluent owner-occupiers are resilient to rising interest rates, the higher cost is a big disincentive to investors. Higher monthly repayments eat into rental yields and diminish capital gains upon resale.

The global outlook is negative following a slew of weak economic data from China and the persistent slump in oil prices. Coupled with rising interest rates, the situation is not boding well for businesses. Although not conclusively proven, it is a prevalent perception among investors that the luxury market will always be worst hit during a global downturn. This is on the basis that housing allowances for expatriates will shrink, prompting a move away from luxury rental properties towards mid-range properties.


Despite the negative sentiment, we have seen a recent surge of attention in high-end properties. On’s website, District 9 homes continue to top search results for both sale (accounting for 7 per cent of searches) and rental (accounting for 7.5 per cent of searches). URA data shows that District 9 remains the second most popular area for rentals, accounting for 10.4 per cent of rental transactions in Singapore. The high volume of rentals, coupled with high view counts, suggest that expatriates continue to view the district as a desirable location to rent. However, URA’s record of sales transactions for District 9 puts it in 15th place, accounting for only about 3 per cent of total sales volume.

The combination of high interest coupled with a low number of actual purchases suggests buyers are adopting a wait-and-see attitude. With prices consistently declining, buyers are waiting for the market to bottom out before making their move.

We observe a similar trend with searches for Districts 10 and 11, the third- and second-most searched districts, respectively. Despite the high levels of interest, these districts account for very few sales, according to URA’s transaction records, with District 10 accounting for less than 4.3 per cent of sales volume and District 11 accounting for just 1.8 per cent. Again, we surmise that interest in these high-end areas remains strong and that buyers are waiting for further discounts or a tweak to the ABSD. The general sentiment continues to prevail that Districts 9 to 11 are the evergreen safe investment bets.

The truly dismal news for luxury property is in District 4, which covers Sentosa and the surrounding properties near Harbourfront. Low search results suggest weak interest despite the steep fall in prices from 2013. URA results for rental and sales volumes in this district also remain poor.

In conclusion, while the luxury segment retains its long-term appeal thanks to Singapore’s strong fundamentals, it is losing its lustre now as current circumstances give buyers no reason to enter the market. The cooling measures such as the ABSD, some of which were announced as temporary when they were implemented, are still in place. While buyers know that these measures will cease at some point, many are inclined to wait things out, especially given that prices seem to keep declining in the meantime.

Mr Darius Cheung is CEO of, a property portal he founded in January 2014 with Mr Dominic Ee, Mr Conor McLaughlin and Mr Anuj Bheda. has raised funds from investors including Sequoia Capital and Facebook co-founder Eduardo Saverin.