The sharp slide in high-end residential property prices is beginning to show up on the radars of serious investors.
From their peaks in the second half of 2007 to the first quarter
this year, transacted prices of luxury condos in the prime Orchard Road
belt have fallen by about 40 per cent.
This is the steepest islandwide decline in condo prices and the
potential buying opportunities that this is opening up are not lost on
investors keen on buying multiple units.
Credo Real Estate’s analysis of URA Realis’ caveats shows the average price transacted at St Regis Residences has fallen 38 per cent from $3,411 per square foot in H2 2007 to $2,099 psf in Q1 this year.
At Ardmore II, the average transacted price has slipped 43 per cent, from $3,073 psf in H2 2007 to $1,761 psf in Q1 2009.
Over the same period, Cairnhill Crest’s average price declined 36 per cent to $1,430 psf in Q1 2009.
‘The projects we selected were those that we believed stood as good
proxies for their respective locations, and ideally have some history
(that is, not launched recently),’ said Credo’s managing director
Karam- jit Singh.
‘Transaction volumes were thin in Q1 this year; there were only
three luxury projects in the Orchard Road belt with at least two
transactions each in the first three months of this year. It’s not an
ideal situation, where we would want to pick from a larger basket of
transactions. But this study still serves to point towards where the
market has been heading,’ he said.
Credo’s analysis also showed that, on average, condo prices in
Sentosa Cove in Q1 2009 were about 30 per cent below H2 2007. In the
city centre, the average price decline in the same period ranged from
22 per cent (for Icon) to 34 per cent (for The Sail @ Marina Bay).
In what Credo dubs the ‘mid-prime segment’ - covering River Valley,
Bukit Timah, Novena/Thomson and Katong - it said average price declines
generally ranged from about 20 to 30 per cent. Suburban condo prices
generally fell less than 10 per cent.
‘The analysis shows the greater price volatility in the prime
districts, which also presents opportunity for greater upside when
recovery sets in, compared with suburban condo prices, which tend to
move in a more subdued fashion,’ said Mr Singh.
The bigger price drops in the Orchard area have led to a narrowing
price gap between the high-end and low-end segments. ‘At some point,
not too far from now, buyers will start upgrading from one tier to the
upper tier,’ Mr Singh reckons.
‘What the price convergence illustrates is the buying potential of
prime properties. It will pay - whether at this point in time or not
very far off from now - to bet on prime,’ he added.
The price declines have surfaced on the radars of potential
investors - individuals, families and some property funds - who are
studying top-notch prime- district projects, with a medium-term
investment horizon. ‘Some have capacity to take about 10 units, some 20
units. Some have budgets of more than $100 million,’ according to Mr
Singh.
CB Richard Ellis executive director Jeremy Lake said high-net-worth
individuals here as well as in a three-hour flight radius from
Singapore are among the key players actively looking for property
investments here. ‘Some are keen on investing in offices; some in
residential - most would go for the high-end, where prices have
corrected the most,’ he added.
Mr Singh said acquisitions would be funded largely with equity.
‘Right now, they’re monitoring the big picture - homing in on a good
time to make a swoop, which projects, at which prices,’ he added.
Mr Lake adds: ‘Some investors are willing to commit sooner rather
than later, compared with a few months ago when everybody wanted to
wait and found pricing to be unattractive. Now, some investors think
pricing is good enough to go.’
Market watchers say the likelihood of deals being struck will also
depend on the threshold of sellers, who could include individuals who
are stretched from holding multiple condo units as well as developers
of projects with low-cost land or who just want to clear unsold units.
DTZ senior director Shaun Poh says some private bankers are trying
to arrange consortiums for high-net-worth clients and are sourcing for
property investments of about $20-50 million per consortium. ‘Their
main target would be high-end condos; some may also be interested in
commercial properties. The banks will also provide financing for the
acquisition.The mandate given to these private bankers is to look for
opportunities priced 20-30 per cent below current values,’ he said.
However, Mr Singh’s advice is: ‘It’s close enough to the bottom that
it makes sense to buy at this stage, rather than buy when it has turned
the corner - by which time the number of competing buyers will be
greater.’
Source : Business Times - 9 Apr 2009
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