Asia's uber rich looking at Singapore penthouses

A $4,200 per square foot for a penthouse at Midtown Modern has brought life back into the luxury market.

A clear and noticeable trend has emerged over the last few months for that ultimate of status symbols —the top floor penthouse apartment. It wasn't just new apartments, like the Midtown Modern penthouse that sold for $14.8m in March 2021 which drew buyer interest. A lot of older apartments also saw their penthouses snapped up, mainly by foreign buyers seeking the best of Singapore.

In penthouses, as with much of life, size also matters. Buyers were also drawn to penthouse units of older developments with large floor areas. There were at least 15 transactions of penthouses above 3,000 sq ft. that were completed between 1991 and 2016. These were sold between $4.3m to $18.0m, with a 7,266 sq ft. penthouse in St. Regis Residences Singapore topping the list.

One reason for this recent penthouse buying spree in the middle of the worst recession the world has seen in decades is that the wealth of the wealthiest people, defined as ultra high net worth individuals (UHNWI) with US$30m or more to invest, actually increased 10.2% last year in Singapore.

“In tandem with Singapore's attractiveness among family offices, it was also observed that both foreign as well as local home buyers were looking at penthouse units or units with large sizes of more than 3,000 sq ft. So with the limited availability of newly launched penthouses, penthouses in the resale market were sought after for those placing greater priority on quality and living spaces,” said Knight Frank Singapore Head of Research Leonard Tay in an interview with Real Estate Asia.

Tay mainly observed that most homebuyers look into average-sized units. However, the last three months saw a shift to larger sized units not just in high net worth groups but also among some foreign buyers.

“Most homebuyers still buy average size units, but we've noticed in the last three months more are looking towards larger size units, especially foreign buyers based on the inquiries that we've been getting,” he said.

“We'll likely see much more interesting transactions of such large size units in 2021,” he added.

Mid-market segment fuels growth

Tay said Singapore reported that the prime non-landed residential segment registered sales amounting to $919.5m in H2 2020. This signified a 34.2% half-yearly increase from $685.1m in H1 2020.

Nevertheless, he said that whilst increase in activity was seen in the private residential market, this was mostly driven by the mid-market and mass market rather than prime and luxury homes.

Prime non-landed private residential units are those that have a floor area greater than or equal to 2,500 square feet. Traditionally, they fall in the prime areas of District 9, 10 and 11, the CBD areas, and the Sentosa area.

“There was healthy demand for private homes during the pandemic. Overall prices of the entire private residential market increased by 2.2% in 2020, but much of the activity was in the mid-market, as well as the mass market, and not so much the prime market. So, not so much the luxury class of private homes,” he said.

Tay said that two main reasons have caused this: first is that prolonged and ongoing travel measures restricted potential foreign investors from purchasing homes in Singapore, and second is that there was a lack of new launches in the top tier class of homes in 2020.

“When taken together, buyers only had the secondary market to find luxury homes in and many sat on the sidelines thinking that with the ongoing pandemic, they have the luxury of time to wait out until travel restrictions ease since prices in this class of property did not really increase,” he said.

Recent reports said that foreign home buyers have shown an increase of interest in Singapore properties in 2020. Tay affirmed this and said that foreign buyers have been seeking luxury properties in the past months.

“The proportion of foreign homebuyers did in fact fall to 17.4% in 2020. This was a 4.2% point drop compared to 2019 when the proportion of foreign homebuyers was 21.6%. The lack of foreign homebuyers is due to still the current travel restrictions still in place,” he said.

“Nevertheless, based on inquiries, there are foreign homebuyers waiting to cross the border and are waiting on the sidelines to purchase luxury properties in various parts of Singapore once it is safe to do so,” he added.

Pick-up in en-bloc market

Tay said that more projects will be launched this 2021 until 2022. Developers opted to stay away from purchasing development sites last year, which will cause a lower than usual stock in available real estate spaces in the medium term.

With the economy recovering and a big number of the workforce looking into being back to the office, Knight Frank sees that new projects will start in the en-bloc market.

“Last year, developers did not really pick up new land sites for development into condominiums and so on. Rightly so, everyone was restrained as there was this whole cloud of pessimism all around. Nobody wanted to spend millions on development sites, but that has left one year without accumulating much of the raw material needed for putting up new residential projects,” he said.

“In 2021, and perhaps next year, there will see some pick-up in the en-bloc market where developers will have to pick up some more material as the unsold stock or sellable stock is dwindling down. To be honest, there is a certain limit to the appetites that developers have at the moment. I think the sweet spot right now is perhaps a site with a land price of around SG$200m, where you can put something like about 200 new units,” he added.

With strong government support and comparing itself to its neighboring countries in the region, Singapore is seen to be ready to also cater to long-term occupiers.

“Data centers and logistics space would be a good long-term investment with stable returns, especially with Singapore attracting that kind of growth driver with all these tech companies coming to the country expecting to branch out into the region,” he said.

Photo courtesy of Knight Frank Singapore.

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