City&Country: Offshore-- Which high-end project to buy?

If the recent transactions in the Marina Bay area are anything to go by, investors with deep pockets are starting to nibble selectively at choice morsels in the high-end residential market. The choicest apartments in the Marina Bay neighbourhood are undoubtedly those that command superb views of the bay from their lofty locations.

In the past couple of weeks, an Indonesian investor is said to have paid about S$9 million (RM21.6 million), or S$3,300 psf, for a unit above the 55th level at the luxury 66-storey Marina Bay Suites condominium tower. The sale of the four-bedroom unit is said to have been brokered by CB Richard Ellis (CBRE).

The last time a unit at the development was sold above S$3,000 psf was in May, when a buyer purchased a unit on the 51st level for S$8.428 million, or S$3,132 psf, according to a caveat lodged with URA.

To date, only about 70 of the 221 units in Marina Bay Suites (developed by the consortium of Cheung Kong (Holdings), Hongkong Land and Keppel Land) are available for sale. The units were first released last December. A majority of the available apartments are above the 40th level and, therefore, command premium pricing. Marina Bay Suites is the second and last residential tower with units available for sale in the multi-billion dollar Marina Bay Financial Centre (MBFC) development.

Meanwhile, at the neighbouring Marina Bay Residences (the first condo tower within MBFC), a foreign buyer is said to have paid S$7.42 million for a 1,959 sq ft, three-bedroom apartment in a sub-sale, according to a caveat lodged with URA in mid-September.

The price of the 46th-level unit worked out to S$3,790 psf, a record at the development. Spectacular bayfront views and good fengshui were some of the reasons that prompted the purchase, says Eric Tay, associate group division director of PropNex, who brokered the sale. Tay specialises in the resale of condo units in the Marina Bay area. He says the buyer also anticipated potential price growth in the area as he had seen how prices in luxury residential projects had shot up in Macau with the entry of new casino operators like Las Vegas Sands, Wynn Resorts and Melco Crown Entertainment, transforming the former Portuguese enclave into the world’s top gaming destination. All 428 units in Marina Bay Residences were fully sold within three days of private previews in December 2006 — back then, the average price was S$1,850 psf.

The previous high was in June 2007, when a 4,488.6 sq ft unit on the 51st level changed hands in a sub-sale at S$3,600 psf, or S$16.6 million. “The reality is that prices at Marina Bay Residences have surpassed the peak in 2007,” notes Tay. The three and four-bedroom units in the development come with private lift lobbies, which is something homebuyers at the top end of the market are also seeking. According to Tay, the asking prices for units with bayfront views at Marina Bay Residences range from S$3,100 psf for lower floor apartments to S$4,800 psf for the penthouses.

Meanwhile, at The Sail, units with bayfront views have prices pegged at S$2,900 to S$3,300 psf. Incidentally, Tay is marketing a four-bedroom, 2,100 sq ft unit above the 40th level at the development. The owner is asking for S$2,900 psf because of the uninterrupted views of Marina Bay from the living room, master bedroom as well as the junior master bedroom.

While the record prices at Marina Bay Residences were achieved for the larger three- and four-bedroom apartments, at The Sail, however, it was the one- and two-bedroom units that racked up record prices. For instance, the highest average price achieved there was for the sub-sale of a 1,033 sq ft, two-bedroom unit on the 60th level. It was sold for S$3.5 million, or S$3,387 psf, in April 2008. This year, the highest average price achieved was for an 883 sq ft, two-bedroom unit that went for S$2.88 million, or S$3,263 psf, in May. Last month, a 1,033 sq ft, two-bedroom unit on the 53rd level changed hands for close to S$3 million, or S$2,899 psf. “Buyers are chasing Marina Bay Residences because it is newer,” observes a local property investor who only wants to be known as Ng. He is very familiar with the Marina Bay area as he lives in a four-bedroom apartment in the taller of the twin towers of the 1,111-unit The Sail, which was completed two years ago.

He owns several three and four-bedroom apartments at The Sail, and recently bought another high-floor, four-bedroom unit there.

Fishing for gems
Despite three government interventions to cool the market — September last year, February this year and most recently, in August — Ng had gone on a “property buying spree”, snapping up nine properties in the past year. Instead of buying units at newly launched projects, however, he has been fishing for gems in the sub-sale and resale market.

“I also target projects in areas that have a growth story, for instance, Tanjong Pagar, with new waterfront residences and the redevelopment of the railway land; and the Kal-
lang-Lavender area, where the new sports hub and waterfront residential district will be located,” he says.

At the end of last year, Ng bought a three-bedroom unit at UOL Group’s Southbank for around S$1,000 psf. The mixed-use project with 197 two and three-bedroom apartments, 60 small office/home office units and some retail units is located along the Kallang River and has unobstructed city views from the high floors. Since completion early this year, prices have started to climb, and the latest transactions of similar high-floor, three-bedroom units of 1,313 sq ft on the 37th and 38th levels have hit S$1,528 and S$1,518 psf respectively, according to caveats lodged in August. In May, a similar-sized unit on the 35th level changed hands for S$1,500 psf.

In the Tanjong Pagar area, Ng has also purchased units at The Beacon on Cantonment Road, Mapletree Investment’s first residential project. Ng feels that the units at The Beacon are underpriced, as three-bedroom units in the 124-unit, 99-year leasehold project, completed in 2008, have been trading at prices in the range of S$1,200 to S$1,350 psf. Meanwhile, high-floor units at the newly completed Lumiere on Mistri Road have been sold at prices above S$2,100 psf in the past month. At the 62-storey Altez on Enggor Street, which was launched in January, the latest transaction involved a unit on the 38th level that was sold for S$2,605 psf, according to a caveat lodged with URA in August. At 76 Shenton Way, where all 202 units were sold out in a single day, a high-floor unit was sold for S$2,600 psf.

Ng has also zeroed in on condos on the city fringe that are close to MRT stations. He recently purchased more units at The Metropolitan on Alexandra Road, next to the Redhill MRT station. He also bought units at Dakota Residences, which was completed in the middle of this year and is just a short walk from the Dakota MRT station that opened on April 17.

Going big
A true-blue contrarian investor, Ng shuns the small-format apartments that most buyers have been snapping up in the last two years at unprecedented prices. “I prefer to go for mid and large-sized units,” he says. In his opinion, the larger-sized apartments tend to attract genuine buyers rather than speculators. “Demand and trends change over time,” he says, recounting that it was the large units that commanded premium prices during the previous peak of 2007.

“Investors should do their homework and buy units that have the potential for the most profits in the mid to long term,” says Ng. “Don’t just follow the crowd. Singaporeans and PRs are well poised to be savvy buyers. Unfortunately, many still suffer from the herd mentality and buy on impulse.” In his view, Singapore is very different from what it was in the mid-1990s. Today, the foreign population is larger, the economy is also bigger and more diversified, while the infrastructure is much better. There are also many mega projects like the Singapore Sports Hub, integrated resorts, Sentosa Cove and new Marina Bay waterfront, and major events like the Singapore Grand Prix.

Transaction volume in the high-end segment of the housing market may have plunged 49% in September compared with a month ago in the wake of the government’s cooling measures on Aug 30, but property consultants have noted a return of interest in high-end condos in prime districts over the last two weeks. This is not just in the Marina Bay and CBD area, but also in the traditional prime Orchard Road districts of 9, 10 and 11, as well as Sentosa Cove. “We’re not talking about a huge wave here, but there’s definitely an increase in the number of enquiries over the last two weeks,” says Phylicia Ang, executive director of residential at Savills Singapore. “And they certainly have a lot of choices.”

More enquiries may translate into more commitments when people realise that the constant chatter of a price correction at the top end of the market has not quite materialised and, therefore, they have to make a decision, reckons Joseph Tan, executive director of residential services at CBRE. “Volume has certainly dropped, but values have held up,” he observes. “There’s also very limited supply of new development sites in the prime districts.”

Small-format apartments
An archetypal foreign investor shopping for deals in today’s market is Hongkong-based Tim Murphy. The founder and managing director of IP Global has an office in Singapore, and zips in and out of the city-state at least once a month. His firm specialises in making bulk purchases of units in prime residential and commercial projects in cities around the world and re-selling them to retail investors.

Since the start of the year, Murphy has been actively looking to re-enter the Singapore market. He first purchased property in Singapore in 2003, when he snapped up three units at the Icon when the project was first launched.

He is close to purchasing two units in an existing condo in the Newton area as his personal investment. He is zeroing in on the Newton Road district, given its proximity to the Newton and Novena MRT stations as well as Orchard Road. In his view, the Newton Road condos, priced at S$1,800 to S$2,000 psf, are still at a marked discount to those in the prime Orchard Road area that are asking for S$2,800 to S$3,000 psf.

Murphy wants to get his hands on even more small-format units, which he believes will continue to attract investors because of their price points. “I’m looking to buy units in completed condos with good rental income,” he says. He is concentrating on the secondary market for buying opportunities in high-end condos in the prime Orchard Road districts. As an alternative, he is also scouting for commercial shophouses in the CBD, which these days offer higher yields and greater prospect for capital growth compared with residential property, he adds. Moreover, as a foreigner buying commercial shophouses, Murphy will not be subject to the more stringent rules under the new Bill to amend the Residential Property Act introduced in Parliament on Oct 18.

However, he sees sales being subdued for the remainder of the year, with a more moderate increase in private residential prices after a 23.1% jump in the URA private property price index from 3Q2009 to 3Q2010. “It’s just going to be a bit more slow and steady,” he notes.

Overseas investors may have been a little nervous about buying Singapore property in the last few months for fear that they are going in at close to the top of the market, concedes Murphy. “Some buyers who have bought residential units are also starting to think that it may be a good time now to offload their units,” he says. The government measures have dampened sentiment, resulting in a 27.6% drop in private new home sales from 1,259 units in August to 911 units in September, according to URA. “But when they cast their eyes around for alternative investments in the region, and they realise that the property markets in Hong Kong and China are probably even more overheated and speculative, the Singapore market appears more stable, in comparison,” notes Murphy.

Ng is of the same opinion and believes that if the world economy doesn’t sink into a double dip recession, foreign demand for Singapore property will rebound strongly in the months ahead. “In Asia, Singapore is one of the more attractive places for foreigners to invest,” he declares.

Cecilia Chow is City and Country editor at The Edge Singapore

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 830, Nov 1-7, 2010