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Drop in Transactions for Luxury Condo in Q3 2023
The luxury residential property market in Singapore faced a challenging third quarter in 2023, marked by a significant decline in sales as a result of various factors, including an anti-money laundering crackdown and higher buyer’s stamp duty rates. According to research conducted by Huttons Asia, luxury home transactions saw a sharp drop of 41.3% quarter-on-quarter, falling from 63 deals in the second quarter of 2023 to approximately 37 deals in the third quarter.
In Huttons Asia’s 3Q2023 Prestige Report, which closely monitors the luxury residential sector, it was revealed that the total value of luxury condo transactions in the third quarter amounted to $295.8 million. This represents a substantial 50.9% decrease compared to the $601.9 million recorded in the previous quarter. The overall luxury condo sales for the first nine months of the year summed up to $1.82 billion across 222 transactions, reflecting a nearly 25% decrease from the same period in the previous year.
Anti Money Laundering Crackdown
The decline in luxury residential property transactions can be attributed to the ongoing investigations into Singapore’s largest money laundering case, which has led to the arrest of ten foreigners and the seizure of assets worth $2.8 billion, including 152 properties with an estimated value of over $1.24 billion. These properties encompass completed and uncompleted residential, commercial, and industrial units.
Additionally, the recent hike in additional buyer’s stamp duty (ABSD) rates, particularly the raise of ABSD rates for foreigners, played a detrimental role in impacting the luxury property market, as noted by Mark Yip, CEO of Huttons Asia.
Conversely, the Good Class Bungalow (GCB) market experienced a decrease in activity, with only three GCBs estimated to have been sold in 3Q2023. This represents the lowest number of quarterly transactions since 4Q2013, with a total value of $69.55 million, marking an 82.3% decrease quarter-on-quarter and an 85% decrease year-on-year.
Rise in ABSD
The higher ABSD rates have prompted more foreigners to consider renting luxury properties while they pursue permanent residency or citizenship status, contributing to increased demand in the luxury rental market. According to Huttons, 701 luxury apartments were rented out in 3Q2023, reflecting a 13.6% increase from the previous quarter. Consequently, rents for luxury condo units saw a slight uptick of 1.8% in 3Q2023, with five-bedroom units experiencing the most significant quarter-on-quarter surge, reaching $36,063 per month.
Goodwood Residence clock $16.4m Profit
The most significant transaction for luxury condo in 3Q2023 took place at Goodwood Residence, a freehold development along Bukit Timah Road. In September 2023, Goodwood Residence penthouse at 10,710 sq ft was sold for an impressive $32 million ($2,988 per square foot), resulting in a gross profit of $16.4 million for the seller. This transaction highlights the resilience of certain luxury properties in the market.
In the first nine months of 2023, rents for luxury non-landed homes surged by nearly 20% to $15,894 per month. The GCB market also followed a similar trend, with rental transactions estimated to have increased by 44.2% quarter-on-quarter. Notably, a detached house in the Nassim Road GCB area secured the largest rental transaction in 3Q2023, with a monthly rent of $120,000.
While there is potential for a resurgence of interest in the luxury housing market, recent months have displayed only a slight uptick in foreign purchases of luxury condo units. It is unlikely that transaction levels will return to the pre-ABSD hike levels. Moreover, the rental market may face a more subdued outlook in the coming months due to lingering concerns related to anti-money laundering operations. Some GCB owners have become increasingly cautious about renting their properties to Chinese foreigners following the recent arrests in GCBs.
