Here's how to score the best buys in the luxury segment

A 10-year old property priced at $1,800 psf is a good buy, according to one analyst.

Private condo resale prices in the Core Central Region (CCR) grew to a record high in March 2018, and some analysts think what’s behind the record is the surge of investors looking for luxury “value buys.” CCR comprises of Districts 9, 10 and 11, plus the Downtown Core Planning Area, and Sentosa.

According to OrangeTee & Tie head of research and consultancy Christine Sun, “Prices of resale homes in CCR have risen more possibly due to pent-demand from savvy investors who are in search of value buys in the luxury segment, given that the price gap of private homes between CCR and RCR is still narrow.”

What kind of valuable homes are investors looking for? For Edmund Tie & Company CEO Ong Choon Fah, residential developments in prime and strategic locations that are lifestyle driven are what is considered a “value buy” in today’s context.

iCompareLoan chief mortgage consultant Paul Ho further explained that the luxury segment is split up into luxury and super luxury, which needs to be further qualified. “Luxury segment is actually quite wide, generally any properties pricing above $2,000 per square feet would ultimately fall into this classification. In a vague sense, landed properties also fall under luxury segment if we classify them based on housing type,” he added.

Ong also noted that investors are looking for older developments, which offer more living space and also people get to enjoy more amenities. “Some will also have the potential of going en bloc in the future. For Singaporeans, Good Class Bungalows is another luxury segment that is a value buy as these are limited in supply and highly desired by ultra-high net worth individuals (HNI),” she added.

Ho agreed with Ong’s statement on older developments and said, “If we based luxury segment based on district, I will go for properties that are more than 10 years old, well maintained and selling at below $1,800 per square feet for size segment of around 800 sqft to 1200 sqft. The price quantum is acceptable while there may be potential upside if the prices start to move up. Value buys are landed inter-terrace houses whose per square feet price on the built-up area is usually less than $1,000,” he added.

PropNex Realty CEO Ismail Gafoor listed some developments that are currently enjoying the attention of investors right now. “New Futura, a rare freehold development in district 9, by developer City Developments Limited is one of the value buys in CCR with its state of the art design and great location and sizes of units. Martin Modern by Guocoland Limited, located at the corner of Martin Place and River Valley Close, would appeal to buyers due to its central location, whilst 8 Hullet by Hullet Development Pte Ltd which sits over Orchard Road would be a great buy due to its low quantum for central prime district area,” he said.

Also read: Investors await right time to grab profits in property market

However, for Ho, the true savvy investors, or those who already have more than one property, will stay away from the market. “The prices are crazy and the fundamentals are weak and there is huge supply in the pipeline. Current investors, such as those that bought the New Futura comprises mainly foreigners. I doubt how they will recover their investment given the low rental yields, rising interest costs. I got a sense that it is more [of] a portfolio diversification play given that they feel bullish about the Singapore Property market, given that the malaise of oversupply has been digested for many years,” he said.

“CCR has risen less compared to RCR for many years now, therefore the price differential is narrowing. Either RCR is overpriced or CCR is underpriced. For investors who are looking at superlatives, definitely, the best of the best will do,” he added.

Ong and Gafoor are more bullish over the situation. Gafoor expects prices to go up by up to 10% this year due to the strong demand from en bloc owners, upgraders, and those waiting at the sidelines for a so-called clear signal. “This signifies significant recovery in CCR due to the rebound in market confidence from local and foreign property investors. The positive growth and price appreciation is expected to continue in 2018 for private residential market in the coming quarters,” he added.

Ong expects prices to continue to improve, driven in part by en bloc sales in the last 12-18 months, as the stock is taken off the market and new developments are priced higher due to higher land costs. “In the short term, owners of en bloc developments will look for housing, usually in the neighbourhood, leading to higher prices. However, this will be moderated in the medium term as new supply (from en bloc and GLS sites) enters the market. The government has also cautioned they will like to see a sustainable market and this will reign in irrational exuberance,” she concluded.