RESIDENTIAL PROPERTY | Marianne Estioco, Singapore

Does buying luxury homes make sense?

Prime properties are much cheaper here.

Singapore's luxury residential market has been battered by a slew of cooling measures in recent years, which caused buyer demand to dry up and led to a steep decline in both rents and selling prices. However, analysts say that now may be a good time to snap up cheap upscale homes in the city-state, as prices hover at record lows and the odds of a policy easing rise.

"We would park our money in the luxury segment vis-à-vis the mass market segment because the luxury segment is attractively priced when compared to mass market projects," said Ivan Looi, investment analyst at RHB Research. He noted that core central region (CCR) property prices have fallen by 8.9% from their peak, while outside central region (OCR) property costs have only dipped by 6.7%.

Looi added that the luxury property market has likely bottomed or is very close to hitting bottom, which means that snapping up prime homes carries less risk compared to buying mass-market properties.

Regina Lim, National Director, Advisory & Research at JLL, said that luxury home prices are close to 2003 recession levels in real terms, and highlighted that prime property prices in Singapore are much lower compared to other global cities.

She added that a positive catch-22 situation exists in Singapore, as the government could remove some cooling measures to mitigate price corrections should economic conditions deteriorate. However, prices could still rise gradually to catch up with global and regional peers.

"To remove friction in the market and allow more transactions, the government could consider replacing the various additional buyer and seller stamp duties with higher property taxes. We believe there will be more opportunities to buy residential units in bulk in 2016," Lim said.

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