SINGAPORE – Two days after a new round of property curbs took effect on April 27, Blossoms by the Park in Buona Vista surprised many with a robust 75 per cent take-up, prompting some analysts to question if the latest measures were sufficient to cool prices and demand.
Within two days of its launch, the city fringe condominium sold 205 of its 275 units despite the announcement late on April 26 of a fourth round of hikes in additional buyer’s stamp duty (ABSD) rates since 2011.
About 96 per cent of buyers were Singaporeans and permanent residents (PRs), though some analysts pointed out that the strong take-up of smaller one-bedroom and two-bedroom units – at new benchmark prices for the area – suggests that many buyers may be investors rather than owner-occupiers.
Singapore citizens and PRs buying second and subsequent homes will pay ABSD of 20 per cent and 30 per cent respectively, up from 17 per cent and 25 per cent.
Despite the new measures, Blossoms by the Park was well received, due in part to pent-up demand and limited new supply in the growing one-north business hub. Not only is it a boon to those who work in the area, the investment appeal of one-north homes is another big draw.
Huttons Asia senior director of research Lee Sze Teck pointed out that rents in one-north are estimated to be 20 per cent higher than in nearby non-landed projects such as Dover Parkview and Heritage View, and are likely to outperform, given the limited supply.
The 99-year leasehold project also set new benchmark prices for the Buona Vista area. The average transacted price of one-north Eden – the previous launch in one-north two years ago – was $2,012 per sq ft, about 17 per cent cheaper than the $2,423 psf average price of Blossoms by the Park, property portal Mogul.sg chief research officer Nicholas Mak said.
The sales also suggest that foreign buyers, particularly Chinese nationals, have not entirely fallen out of love with Singapore private property despite being hit with a new ABSD rate of 60 per cent, up from 30 per cent previously.
In all, eight foreign buyers purchased units at Blossoms by the Park, four of whom were Chinese nationals and the rest American citizens.
Under a free trade agreement (FTA) between the United States and Singapore, US nationals are accorded the same stamp duty treatment as Singapore citizens. Those from Iceland, Liechtenstein, Norway and Switzerland are also accorded the same treatment, due to an FTA between the European Free Trade Association – which all four are part of – and Singapore.
Chinese buyers purchased four units on mid- to high floors of the 27-storey building, Mr Lim Yew Soon, managing director of EL Development, told The Straits Times.
They could have paid a total of at least $5.34 million in estimated ABSD and buyer’s stamp duty (BSD), on top of their purchase price.
Mr Lim said Chinese nationals paid between $2.1 million and $2.3 million for each of two three-bedroom dual key units, and between $2.5 million and $2.7 million for a three-bedder at Blossoms. All three units are located at the mid-level of the project.
Based on back-of-the-envelope calculations by property consultancy Delasa, the Chinese nationals could have paid an estimated $1.26 million in ABSD plus $74,600 in BSD for a $2.1 million three-bedroom dual key condo. For a $2.5 million three-bedder, they could have paid an estimated $1.5 million in ABSD plus $94,600 in BSD.
One other Chinese buyer of a two-bedder that transacted between $1.7 million and $1.9 million could have paid at least $1.02 million in ABSD, plus $54,600 in BSD.
Mr Karamjit Singh, chief executive of Delasa, said: “For the Chinese buyers, they look at the entire quantum they are paying for Singapore property ownership – purchase price and transactional costs.”
He pointed out that foreign investors are perceived to be “chasing up prices of high-end homes in Dubai, New York and London”.
While foreigners account for only about 5 per cent of overall new home sales in Singapore, the Government is pre-empting potential price distortion in the luxury home market, which could have a trickle-down effect on the wider housing market, Mr Singh said.
While Blossoms by the Park was well received, will the upcoming slew of new launches – potentially at least 30 this year – attract such robust take-up rates? And just how effective will the new cooling measures – the third since December 2021 – be in curbing robust local and foreign investment demand?
Some analysts believe most new launches in the city fringe and suburbs are likely to move ahead as the buyers are predominantly Singaporeans and PRs.
But they reckon those in the prime district, which tend to attract more foreign buyers than the other two sub-markets, may have to rejig their pricing strategies.
The latest ABSD hike may put pressure on developers of prime district projects approaching a critical sales deadline to come up with new strategies, including discounts. This, in turn, could further weigh on sales and prices in this segment.
Following the December 2021 cooling measures, developers have to pay an ABSD of 35 per cent on their residential site purchase price, up from 25 per cent previously.
In addition to the 35 per cent ABSD rate, which may be remitted if they complete and sell all units within five years, the non-remittable component of 5 per cent remains unchanged.
As the penalty for missing the five-year sales deadline is hefty, some developers would rather offload their remaining units at a discount than incur the penalty.
At least one prime district project, Newport Residences – a luxury condominium on the site of the former Fuji Xerox Towers in Tanjong Pagar – has held off its preview that had been slated for this past weekend.
“But the developer (City Developments) is not under time pressure to sell because the property is part of their legacy assets. They are redeveloping a site they already own, so they are not subject to the five-year ABSD deadline,” Mr Singh said.
Another developer, Far East Organization, will be going ahead as planned with the preview of The Reserve Residences in mid-May. The project in Bukit Timah is an integrated development with 732 residential units.
Mr Mak said the strong sales of Blossoms by the Park suggest that the latest round of cooling measures is unlikely to cool residential property prices.
“In the coming months, we can expect new mid-tier and mass-market residential projects to be launched at new record-high benchmark prices. Therefore, the latest cooling measures are unlikely to reduce the overall residential property prices,” he added.
CBRE’s head of research for South-east Asia Tricia Song said home prices are unlikely to correct significantly due to low stock of unsold private units as at the fourth quarter of 2022.
“With this new set of measures, we think home price growth has peaked and is likely to flatten out in the next few quarters. However, we do not expect a significant price correction, given the low unsold inventory and barring a sustained recession,” she added.
Mr Mak noted that the main drivers of demand in Singapore’s property market are local residents who are not affected by the increase in ABSD, citing how some buyers are using the names of their trusted relatives and the so-called “decoupling” method to acquire additional residential properties and legally avoid paying the ABSD.
To cool excessive investment demand in the market, the Government should start cracking down on these methods used by local residents to buy more than one private housing unit per household, he said.
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