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

Sentiment in the luxury homes market continued to decline in the 3Q2023 after an anti-money laundering crackdown made headlines in August. Transactions of luxury homes dropped 41.3% q-o-q from 63 deals in 2Q2023 to an estimated 37 deals in 3Q2023, according to research by Huttons Asia. The transacted amount between January and September is almost 25% lower than the same period in 2022.

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Mark Yip, CEO of Huttons Asia, observes that the fall in luxury residential transaction volume comes amid ongoing investigations into Singapore’s largest money laundering case. To date, 10 foreigners have been arrested, while $2.8 billion in assets have been seized or issued with prohibition of disposal orders. This includes 152 properties with an estimated value of over $1.24 billion.

These investigations have further eroded 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%.

According to the 3Q2023 Prestige Report, luxury condo transactions clocked a total value of $295.8 million during the last quarter, representing a 50.9% decline compared to 2Q2023. The biggest transaction of the quarter occurred at Goodwood Residence, the 210-unit freehold development by GuocoLand, where a 10,710 sq ft penthouse was sold for $32 million ($2,988 psf).

Activity in the Good Class Bungalow (GCB) market was also more muted. Only three GCBs are 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.

Rental transactions saw an uptick in 3Q2023 off the anti-money laundering operation. Based on luxury condos monitored by Huttons, 701 luxury apartments were rented out in 3Q2023, 13.6% higher than the previous quarter. Rents of luxury condo units edged up 1.8% in 3Q2023 on the back of the higher demand, with five-bedders seeing the biggest q-o-q surge in rents of 16.6%.

Yip predicts the luxury housing market may see a return in interest, noting that recent months have displayed a slight uptick in purchases of luxury condo units by foreigners. However, the level of transactions is unlikely to return to levels achieved before the ABSD hike.

The rental market may also be more subdued in the coming months, coming off the anti-money laundering operation. “After the arrests of money laundering suspects in GCBs, owners of GCBs are increasingly wary of renting their GCB to Chinese foreigners,” Yip says.

The luxury homes market has seen a downturn since the third quarter of this year, with sentiment continuing to decline after a crackdown on money laundering. Transactions of luxury homes plummeted 41.3% q-o-q and the transacted amount between January and September was almost 25% lower than the same period the previous year.

These investigations, coupled with the hike in additional buyer’s stamp duty (ABSD) rates that took effect in April, have greatly impacted the market. Mark Yip, CEO of Huttons Asia, believes that more foreigners may now be choosing to rent instead while they seek to obtain permanent residency or citizenship status, leading to heightened demand in the luxury rental market.

Therefore, activity in the Good Class Bungalow (GCB) market was more muted in 3Q2023, with only three GCBs being sold for a total value of $69.55 million. Additionally, rental transactions in the sector have seen an uptick, increasing 13.6% from the previous quarter. The biggest rental transaction of the quarter was a detached house in the Nassim Road GCB area, which was rented out for $120,000 per month.

Yip predicts the luxury housing market may see a return in interest, though the level of transactions is unlikely to return to pre-ABSD hike levels. He also adds that the rental market may be more subdued in the coming months due to owners of GCBs being wary of renting to Chinese foreigners.