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Nikkei Markets

Singapore home prices rise as prime areas see strong demand

Investors drawn to relative stability of city-state

Unrest in Hong Kong has investors eyeing Singapore as a safe haven.   © AP

SINGAPORE (Nikkei Markets) -- Prices of privately built homes edged higher in the third quarter as demand for apartments in prime districts received a boost from international investors seeking safe-haven assets and buyers drawn to city-center living.

Data from the Urban Redevelopment Authority showed that private residential prices rose 0.9% in the third quarter from the April-June period, continuing the recovery that started in the second quarter when prices gained 1.5%.

The biggest increases were seen in the city center, where apartment prices gained 2.9% sequentially, accelerating from the 2.3% pace in the previous quarter.

Christine Li, head of research for Singapore and Southeast Asia at Cushman & Wakefield, said Singapore seems to be benefitting from the diversion of investments into the high-end residential market amid the uncertainty posed by the ongoing trade war between the U.S. and China.

"Singapore has always been seen as a safe haven in times of market volatility," she said.

The pro-democracy protests in Hong Kong, which have continued for weeks and raised tensions, have also lifted Singapore's appeal, say some analysts.

According to URA's data, price gains elsewhere in the city-state were more modest. In the rest of central region, which refers to homes in the city fringes, prices rose 1.6% after a 3.5% increase in the previous quarter. Prices in the suburbs edged up by 0.7% after gaining 0.4% in the preceding period.

The continued strong demand for homes in prime locations comes despite government measures aimed at discouraging purchases by wealthy foreigners as well as locals seeking to buy second properties. For example, foreigners who buy homes now have to pay an additional buyer's stamp duty of 20% of the property's value, up from 15% before the rules were changed in July 2018.

Real estate consultancy OrangeTee & Tie said in a recent report that sales of Singapore apartments worth at least $10 million Singapore dollars ($7.2 million) hit an 11-year high based on figures from January to August, fuelled by increased demand from wealthy Chinese nationals seeking safe-haven assets.

In July, British billionaire James Dyson paid S$73.8 million for a three-story "super penthouse" in Guoco Tower, Singapore's tallest building, located in the office district.

Private property accounts for about 20% of the housing stock in Singapore, where most people live in publicly developed apartments.

Ong Choon Fah, CEO of Edmund Tie & Co, another real estate consultancy, said city living has become an increasingly popular trend globally with many people prepared to accept smaller living spaces in exchange for a central location with nearby amenities.

Looking ahead, analysts said they expect private home prices in Singapore to continue edging higher as strong underlying demand and low interest rates offset the impact of a slowing economy.

Desmond Sim, head of research for Southeast Asia at CBRE, noted that while property prices have been increasing on a per square foot basis, the prices paid per apartment have actually remained steady as sizes are shrinking.

During the third quarter, for instance, the median unit size for new homes stood at 710 square feet while the median price was S$1.27 million.

A price tag below S$1.5 million "continues to be the sweet spot for investors," he said, adding that 72% of new home sales are transacted below that amount.

--Kevin Lim

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