High-End Residential Property Purchases By Singaporeans Surged

Changing Lifestyle Requirement Due To C-19 WFH:

High-end residential property purchases have increased for sure and are expected to surge up even more. As the Covid-19 epidemic has caused people to spend more time at home, owner-occupiers are changing their residences to larger, more luxurious homes to enhance their living spaces. This occurs as many people now Work From Home (WFH) owing to pandemic-related precautions and are looking for ways to enhance their living conditions.

For rich purchasers who have not been impacted by the Covid-19 epidemic, this may be an opportune moment to increase their dwelling spaces.

Home owners are driven by increasing property prices so they are willing to put their houses on the market to sell for a good capital gain from their initial investment. Hence, it is making it easier for other high income earners to buy these properties. With the profits from selling their houses, the wealthy home owners reinvest their profits into upsizing their homes to bigger and more luxurious apartments or landed properties.

Increase In UHNWI Despite Worst Recession:

Research conducted by Knight Frank discovered that Singapore’s ultra-high-net-worth individuals (UHNWI) increased by 10.2 percent in 2020 to 3,732 , despite the national economy experiencing its worst recession in more than 50 years.

High-End Residential Property Above $5m Increase In Demand:

a) From Locals:

S$5 million and above luxury residences have experienced a 44 percent increase in caveats from Singaporeans; these purchases were from investors as well as owner occupiers.

In recent quarters, luxury houses have gained a significant amount of popularity among wealthy Singaporeans, as both investors and owner occupiers staked their claim on upscale properties.

In the first quarter of this year (Q1 2021), the number of caveats submitted by Singaporeans for residential properties priced at S$5 million and above increased by 44% from 160 in the fourth quarter of 2020; and by 56% since Q2 2018 during the last en bloc frenzy.

Singaporeans registered 148 caveats for high-end residential property purchases in Q2 2018 because they have huge cash payout from the last en bloc, said deputy director of the Institute of Real Estate and Urban Studies (IREUS) at the National University of Singapore, Dr Lee Nai Jia. A windfall in collective-sale gains that started in 2016 made many unit owners flush with cash, fuelling the buying sentiment, especially for landed properties at the time.

b) From PRs And Foreigners:

Buying interest in high-end residential property purchases has lately increased among Singapore permanent residents (PRs) and foreigners, but at a lesser extent.

Penthouse And Condos With Large Spaces In Great Demand:

Knight Frank Singapore’s head of research Leonard Tay tells The Business Times that wealthy homebuyers are looking for penthouses or flats that have a living area of more than 3,000 square feet.

Low Supply Of New Launch Penthouses Fuels High Demand For Resale Penthouses:

As a result of limited availability of newly launched penthouses, resale penthouses were high in demand last month from these UHNWIs, who place greater importance on space and quality,” he said.

Why The Wealthy Invest In Landed Property And High-End Homes:

a) Seen As Better Capital Preservation:

Landed homes and high-end flats are more attractive to those with a long-term investment outlook, says Lee. Investors believe that high-end houses will remain or even rise in value over time, although they understand that the housing market is subject to cycles. Moreover, there is a perception in the market that landed properties and luxury assets in prime areas such as the Orchard area are scarce, which would help maintain their values, according to Dr Lee.

b) More Foreigners Are Also Investing In High-End Homes:

A growing number of foreigners are investing in high-end homes as well. In view of Singapore’s control of the Covid-19 epidemic, more visitors will be enticed to the city-state. Unless the market dramatically changes or the government intervenes to calm it, the number of caveats filed for luxury residential properties will continue to rise in the coming quarters.

Bankruptcy Filing: A Consequence Of C19

Meanwhile, an unintended consequence of the Covid-19 pandemic is that more citizens of the country filed for bankruptcy in the same period. The Insolvency Office reports a 13.2 percent increase in bankruptcy petitions in January-March 2021, up from 688 in the previous three months but still 39% lower than the 1,278 applications reported last year in Q1 2020.

Dr Lee said that the number of persons declared bankrupt last year was the lowest in five years. He stated that the rise in applications in Q1 2020 was primarily due to the economic slowdown caused by US-China trade tensions.

Despite the coronavirus epidemic, demand for residential properties has been gradually increasing, with prices for Housing Development Board (HDB) resale flats rising for 6 consecutive quarters according to flash data estimate on 1.10.2021. Similarly private housing also rose for 6th straight quarters. According to Business Times, the difference between median household income and new condominium prices widened more in 2020.

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Sources:
1) https://www.businesstimes.com.sg/real-estate/spike-in-singaporeans-snapping-up-posh-residential-properties
2) https://www.todayonline.com/singapore/luxury-home-sales-rose-10-fold-march-most-buyers-singaporeans-foreigners-picked-trophy-homes