Luxury residential sales plunge in 3Q2023; leasing demand rises: Huttons Asia

Sentiment in the luxury homes market in Singapore continued to decline in the third quarter of 2023 after an anti-money laundering crackdown that made headlines in August. The major crackdown took a toll on luxury residential transactions, with transacted amount dropping to $295.8 million in 3Q2023, 50.9% lower compared to the $601.9 million in 2Q2023. This brings luxury condo sales for the first nine months of the year to $1.82 billion across 222 transactions – almost 25% lower than the same period in 2022.

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The biggest factor impacting the luxury homes market is thought to be the ongoing investigations into the largest money laundering case in Singapore. To date, 10 foreigners have been arrested, with $2.8 billion in assets seized or issued with prohibition of disposal orders. This includes 152 properties with an estimated value of over $1.24 billion, comprising 60 completed and 34 uncompleted residential properties, as well as commercial and industrial properties.

According to Mark Yip, CEO of Huttons Asia, the anti-money laundering case further dampened sentiments in the luxury homes market, which had already been detrimentally impacted by the hike in additional buyer’s stamp duty (ABSD) rates that took effect in April, including the doubling of ABSD rates applicable to foreigners to 60%.

The biggest luxury condo transaction in 3Q2023 happened at Goodwood Residence, the 210-unit freehold development by GuocoLand along Bukit Timah Road. In September, a 10,710 sq ft penthouse at Goodwood Residence changed hands for $32 million ($2,988 psf). The unit was sold to a Singapore permanent resident of Chinese nationality, and the seller made a gross profit of $16.4 million on the transaction.

Activity in the Good Class Bungalow (GCB) market was also more muted, with only three GCBs estimated to have been sold in 3Q2023, making it the lowest number of quarterly transactions since 4Q2013. The three GCBs were sold for a total value of $69.55 million, 82.3% lower q-o-q and 85% lower y-o-y.

The higher ABSD rates may be causing foreigners to opt for renting luxury units while they seek to obtain permanent residency or citizenship status, which has led to a heightened demand in the luxury rental market. 701 luxury apartments were rented out in 3Q2023, 13.6% higher than the previous quarter, and rents of luxury condo units edged up 1.8%. The GCB market also saw a similar trend, with rental transactions up by an estimated 44.2% q-o-q.

Even though the luxury rental market is currently thriving, there is still an overall fall in luxury residential transactions, and the level of transactions is unlikely to return to levels seen before the ABSD hike. Huttons adds that recent months have displayed a slight uptick in purchases of luxury condo units by foreigners, though this may not be enough to make up for the drop. Yip predicts that the situation may be further exacerbated, as GCB owners are reported to be becoming increasingly wary of renting their properties to Chinese foreigners.