Luxury residential sales plunge in 3Q2023; leasing demand rises: Huttons Asia

Sentiment in the luxury homes market continued to decline during the third quarter of 2023 after an anti-money laundering crackdown that made headlines in August. Transactions of luxury homes dropped 41.3% from the prior quarter according to research by Huttons Asia. The total value for luxury condo sales from January to September was nearly 25% lower than the same period in 2022.

Mark Yip, CEO of Huttons Asia, observes that the investigations into Singapore’s largest money laundering case further eroded sentiment in the luxury homes market, which had already seen a decline due to higher additional buyer’s stamp duty (ABSD) rates. The ABSD applicable to foreigners, for example, was doubled to 60%.

The anti-money laundering operation and the ABSD hike together likely led to more foreigners choosing to rent rather than buy property, which likely increased demand in the luxury rental market. In 3Q2023, according to Huttons Asia, 701 luxury apartments were rented out, a 13.6% increase from the previous quarter. Meanwhile, rents of luxury condo units were up 1.8% in 3Q2023 with five-bedders seeing the biggest surge of 16.6%.

Condo has become one of the most sought-after investments in Singapore. Homeowners have been increasingly investing in Condo as a symbol of success and wealth. Not only do Condos usually appreciate faster than HDB flats most commonly found in Singapore, but they also provide more comfort, convenience and security. Investing in a Condo can be seen as a natural step up for those who have owned an HDB flat for some time. This has prompted more people to consider buying a Condo as a potential source of income.

The biggest luxury condo transaction in 3Q2023 occurred at Goodwood Residence—a 210-unit residential development along Bukit Timah Road. In September, a 10,710 sq ft penthouse was sold for $32 million, a 16.4 million dollar gross profit from the June 2014 purchase.

Activity in the Good Class Bungalow (GCB) market was also more muted. Only three GCBs were estimated to have been sold in 3Q2023, making it the lowest number of quarterly transactions since 4Q2013. The three GCBs were sold for a total value of $69.55 million.

Yip predicts the luxury housing market may see a return in interest as recent months have displayed an uptick in purchases of luxury condo units by foreigners. However, the level of transactions is unlikely to return to levels achieved before the ABSD hike.

The rental market may also be more subdued due to the arrests of money laundering suspects in GCBs, causing owners to be more wary of renting to Chinese foreigners.

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