Singapore Luxury Residential Market | The Cairnhill Nine Launch
Study shows that Singapore still cost competitive for luxury home buys like the upcoming Cairnhill Nine launch.
Even after factoring in a hefty additional buyer’s stamp duty (ABSD) of 15 per cent on foreign property buyers, Singapore is still cost competitive compared to London and Sydney for luxury home purchases.
This was among the key conclusions from an inaugural Global Tax report.
The study found that Singapore’s tax costs and property costs are lower compared to London and Sydney for a foreigner acquiring a property worth US$10 million and holding it for 5 years before selling it.
For a US$1 million property, however, Singapore’s tax costs for a foreigner buying, holding and selling it over the same period is higher compared to the other 2 gateway cities, though the property costs are relatively lower.
The residences being offered for sale in the Cairnhill Nine launch, ranging between USD$1M to USD$4.5M, fall somewhere between these 2 categories.
The ABSD has been seen as a key deterrent to foreigners purchasing high-end homes here in the last 2 years, with foreigners (excluding permanent residents) making up only 12.5 per cent of private home purchases in the Core Central Region (CCR) in 2015.
Macro-prudential tools used in Asian economies such as Hong Kong, Singapore, and China, to rein in exuberance in their property markets, have been increasingly used in some Western countries.
However, in spite of property taxes being introduced in Australia and the UK, they have not quashed foreign appetite for properties in Sydney and London, as these cities’ pull factors such as capital appreciation, education and security continue to draw buyers.
In computing tax and property costs, the study assumes that the purchaser buys a property in August 2015 in a foreign country fully in cash, and does not include estate, gift, or inheritance taxes. It has also kept certain factors constant – rental and capital growth of 3 per cent and 5 per cent per annum respectively, and first year gross yield of 4 per cent.
Given the divergence of price trends between Singapore and the other 2 gateway cities London and Sydney, value has emerged for Singapore’s residential market, even after accounting for tax.
Prices of private non-landed homes in the CCR slipped 2.5 per cent in 2015 after a 4.1 per cent fall in 2014, based on data from the URA (Urban Redevelopment Authority). Industry players have flagged steeper declines in certain luxury projects.
The Cairnhill Nine Launch | Luxury Residential Market Outlook
The outlook for high-end homes remains patchy. While there has been some interest from potential foreign buyers, particularly Indonesians, it remains to be seen whether this heralds a trend.
Prices of high-end homes have trended down to a sweet spot, offering prospects of potential capital gains in the medium to long term, as the government rolls out a series of economic plans for Singapore in the long run.
One reassuring sign has been a gradual decrease of unsold inventory in Singapore’s CCR. Of the nearly 25,000 unsold units island-wide as at the end of 2015, about 26 per cent are located in the CCR.
By 2019, there will be no new supply of completed homes in the CCR. As the unsold inventory winds down, in tandem with the high supply of completed homes in the outside central region (OCR), the appeal for high-end homes may continue or even rise.
Adapted from: The Business Times, 2 February 2016
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