Here’s why the luxury property market’s recovery may be a one-off blip

Prices have not yet reached an inflection point.

Prices of luxury residential properties in Singapore rose for the first time in three years in the first quarter of 2016, but a report argues that the rebound in prime property prices may not be sustainable after all.

“While it is encouraging to see an uptick, our analysis of transaction data does not suggest a turning point as yet,” Jefferies Singapore said in a report.

Jefferies noted that quarterly resale volume in the prime area has remained range-bound over the last eight quarters. While average transaction size has seen an uptick in the first quarter, the report noted that this was mainly due to one-off transactions.

The rise in primary volumes was also due to the launch of smaller units at Cairnhill Nine, which led to the sale of 241 units in Q1 compared to an average of 100 units in the primary market for the last five quarters.

Jefferies warned that luxury property prices may continue to drop as tax regimes in other top markets change.

“Currently, Singapore prime property stacks up well against global peers but for ABSD. However, tax regimes are changing in other cities. For example, stamp duties are being introduced in London for second homes and application fees have been introduced for foreign property buyers in Australia,” the report said.

“These changes, along with the fact that some of the core central region's unsold inventory of 25,000 units is approaching QC deadline, may lead to realistic pricing, more launches and hopefully increased transaction,” Jefferies added.