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Singapore luxury homes market on a roll

   
In June, a City Development apartment with South American hardwood floors sold for a record of more than S$3,000 per sq ft, 25 per cent more than the previous high in 1997

Business Times Malaysia, September 13 2006

SINGAPORE: Mark Edleson, a former Citigroup Inc vice-president, needed a waterfall to persuade his wife to quit their estate outside Jakarta and move to Singapore. He found it inside a US$2.9 million (US$1 = RM3.68 million), marble-floor apartment.

"We fell in love with it," said Edleson, 59, of SC Global Developments Ltd's unit, one of 55 with an indoor water feature, just five minutes from the city-state's premier shopping district. "Seems like the very highest end is the strongest sector of the Singapore real-estate market."

The market for Singapore's luxury homes - those costing more than about S$1,500 (S$1 = RM2.33) per sq ft - is on a roll as the US$118 billion economy has its longest expansion in five years. Prices are rising to match gains of as much as 42 per cent in Bangkok, Hong Kong and Shanghai in the past two years, as new tax breaks and ownership rules lure overseas wealth.

Bidders for luxury digs such as Edleson's - with 3,300 sq ft of living space set in a tropical garden - have driven home-purchase costs to records this year. Developer Kwek Leng Beng forecasts a further 10 per cent to 20 per cent increase in 2006.

"We're just at the beginning of an upward trend," said billionaire Kwek, 65, chairman of City Developments Ltd, Singapore's second largest property company. "That's not just a possibility, that's a probability."

Singapore buyers are paying 11 per cent more for the most expensive homes in the past two years, according to property broker Jones Lang LaSalle Inc.

In June, a City Development apartment with South American hardwood floors sold for a record of more than S$3,000 per sq ft, the company said without disclosing the total.

That's 25 per cent more than the previous high in 1997, according to CB Richard Ellis Inc, the world's largest real-estate adviser.

The gain was about 8 per cent, to S$1,670 per sq ft on average, in the second quarter of this year, from the first three months, CB Richard Ellis said. Joseph Tan, the company's director of residential services in Singapore, forecasts a further 20 per cent increase.

"When compared with global standards, it's still considered very reasonable, even cheap," said Winson Fong, who helps manage US$2 billion at SG Asset Management Ltd in Singapore and declined to name his stocks.

"In the last 10 years, the property market has been doing nothing," he said.

The surge is powered by new tax laws designed to lure wealth to the city-state's private banking industry and an easing of home-ownership curbs, especially for non-natives.

The Government exempted domestic and overseas investments from capital gains tax in 2004. Singapore's private banks now manage US$200 billion, according to the central bank, with about 70 per cent of funds coming from abroad.


   
Yeoh does not expect prices of Singapore's properties to come down, especially high-end
"In private banking, the next big wave will be Indians and Chinese, and they will buy apartments," said Tan Sri Francis Yeoh Sock Ping, managing director of YTL Corp, Malaysia's biggest builder.

"Singapore properties will not come down, especially high-end," he said.

The Government also included property last year in the S$2 million that overseas investors must hold in Singapore to apply for residency. In addition, it permitted non-Singaporeans to buy apartments in buildings with fewer than seven stories without seeking government approval.

Development is booming. Eight publicly-traded property companies and their units raised S$5 billion from equity and debt investors in the first half of 2006, almost three times the amount raised in the same period last year, according to data compiled by Bloomberg.

Shares of CapitaLand Ltd, Singapore's largest developer, have risen 61 per cent in the past 12 months. SC Global stock has gained 72 per cent and City Developments is up 5 per cent.

Winston Liew, a property analyst at OCBC Investment Research Pte Ltd here, cautioned that the boom may not last. Developers buying older apartments, known as en bloc purchases, risk overbuilding, Liew said.

"The reason there are so many en blocs is the perception that the appreciation in the high-end prices is sustainable," Liew said. "This hot money could potentially disappear."

Even so, home prices are 33 per cent off their peak, government data shows. Prices started falling in mid-1996 when the Government moved to curb speculation by taxing as much as 100 per cent of profit from the immediate sale of residential property.

Las Vegas Sands Corp's planned US$3.6 billion casino-resort for Singapore, which is due to open in 2009, also may drive prices higher. Bids for a second casino are due next month.

"The big casinos coming in will help" attract home buyers, said Mark Mobius, who oversees US$30 billion as managing director of Templeton Asset Management Ltd here.

Apartment buyer Edleson, now the president of Alila Hotels and Resorts, said market gains were tempting him to sell his ground-floor apartment.

His wife may not be so keen to find a different Singapore home, he said.

"We appreciate outdoor space and it's very hard to get that in an apartment culture," he said. "Luxury is space today." - Bloomberg
Copyright 2006 The New Straits Times Press (M) Berhad. All rights reserved.



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