It’s time to home in luxury condominiums in Singapore

Singapore has long been an attractive destination for luxury real estate investments owing to its political stability, the rule of law, favourable tax environment, a freely convertible currency and safe-haven status. Ultra-high-net-worth individuals (UHNWIs) and foreigners prize luxury homes in Singapore as secure assets for wealth preservation and protection against risks and uncertainties.

Despite the higher Additional Buyer's Stamp Duty, Singapore's luxury condominium market has not been impacted severely. It remains attractive to affluent Singaporeans and foreigners (including permanent residents), who are generally ineligible for luxury landed home purchases, except in Sentosa Cove (subject to approval).

More people are buying luxury condominiums costing at least SGD5 million from Singapore’s Core Centre Region (CCR), which encompasses postal districts 9, 10, 11, Marina Bay and CBD, and Sentosa Cove. In 2022, 453 units worth SGD3.7 billion changed hands, surpassing pre-pandemic levels, which averaged 373 units worth SGD3.1 billion annually in 2018 and 2019. That buyers remained keen on luxury homes here in 2022 despite stronger headwinds, market cooling measures and limited new luxury project launches attests to the appeal of luxury condominiums in Singapore.

From 2020 to 2022, Singaporean buyers accounted for 40% of the luxury condominium market in Singapore, up from about a third in 2018 and 2019. Foreign buyers constituted 60% from 2020 to 2022. Both Singaporean and foreign buyers bought more units in 2022 compared to the pre-pandemic years of 2018 and 2019, reflecting an expanding local demand base and foreigners’ unfaltering appetite for such properties in Singapore.

The top five foreign buyers in 2022 hailed from China, the USA, Indonesia, Malaysia and Taiwan. Notably, China has been Singapore’s top source of foreign purchasers of luxury condominiums since 2013, except for 2016, when Indonesian buyers ranked first.

Growing wealth in the region and Singapore will continue to drive demand for luxury real estate in the country, and Singapore is expected to remain a major hub for cross-border investments. China had the second-highest number of UHNWIs in the world in 2022, according to Credit Suisse’s Global Wealth Report 2022, and its reopening is set to drive more of Asia’s wealthy population to Singapore. This will be a boon to the country’s luxury condominium market.

The property market curbs implemented over the years have shifted demand towards more affordable segments, leading to steeper price increases for non-landed homes in the mid-tier (31.7%) and mass-market (27.7%) segments since the peak in 2013 to 2022. In comparison, capital appreciation for non-landed homes in the CCR was more measured by 3%, hence narrowing the price gap between these segments.

Rents of non-landed homes in the CCR fared better. Underpinned by a tight supply, they rose 28.2% annually in 2022, keeping pace with the 30.3% and 31.8% hikes in the mid-tier and mass-market segments, respectively. This resulted in an expansion of rental yields of non-landed homes in the CCR.

The narrowing price difference and higher rental returns, along with an anticipated increase in demand, could further escalate the prices of luxury condominiums. This creates a favourable opportunity for astute investors to enter the market for potential capital appreciation. The strengthening Singapore dollar also presents prospects for currency gain, further sweetening the deal.

There could be better times yet this year.

Figure 1: Buyers of Non-Landed Homes in CCR (SGD 5 Million and More)

Source: Urban Redevelopment Authority, JLL Research