S'pore luxury property market still resilient

S'pore luxury property market still resilient

Singapore luxury property remains resilient despite the government's cooling measures, as the wealthy look to the city as a 'safe haven' and a lifestyle destination.
A survey of 4,000 individuals worth an average of US$100 million each cites Singapore as the fifth most favoured second home location across all respondents. In pole position was the United States, followed by the United Kingdom, France and Spain.

In terms of quality of life, Singapore took second place, after London.

The study reflects the growing shift in emphasis towards the East, where the number of 'centa-millionaires' - defined as those with a net worth of at least US$100 million in investible assets - is growing rapidly.

For instance, the current ranking of the most important global cities finds Singapore in fifth spot, after London, New York and Hong Kong. Shanghai and Beijing were ranked eighth and ninth, respectively.

In 10 years, based on the expectations of survey respondents, Singapore continues to take the fifth spot. But Beijing and Shanghai moved up to third and fourth places, respectively.

In terms of the rise in the number of centa-millionaires, the fastest growth by far between 2011 and 2016 is projected to occur in Africa, South and Central Asia, the Middle East and South-east Asia.

Property remains a favoured asset among high net worth individuals. It has the biggest share of 31 per cent of portfolios on average, and equities and bonds have 31 per cent each in 2011. In the Asia-Pacific, however, property's share of portfolios is higher at 31 per cent, with equities taking 24 per cent and bonds 16 per cent.

The study finds that 57 per cent of the ultra high net worth individuals expect to increase their residential property portfolio. The growing wealth market has led to the emergence of 'super prime' markets, characterised by transactions of at least US$20 million each. Of these transactions, foreign buyers typically account for a quarter. In Asia-Pacific, Singapore and Hong Kong are super-prime markets, but Shanghai may well emerge as one too.

The report notes that Asian markets such as Singapore and China have implemented property cooling measures which have hit prices somewhat last year.

In Singapore, however, the demand for prime residential property among foreign buyers remains intact.

The trend among foreign buyers implies that notwithstanding the Additional Buyers Stamp Duty (ABSD), ultimately the rich will buy Singapore property. This is due to a number of factors such as Singapore's stable political and economic environment; its safe haven status for capital and it offers an attractive lifestyle.

In terms of investment themes, Citi Private Bank head of investment (Asia Pacific) Debashish Duttagupta said clients should 'intensify their quest for yield'. 'It's our view that rates will stay low and risk free yields will stay low. This has deep implications for real estate markets.' With this backdrop, he adds, financial investments will also continue to outperform.

He suggests that clients could construct real estate investments including commercial property that behave like a fixed rate bond in terms of its yield.

Dividend stocks are also an attractive option. 'It does not mean that in a market rally dividend stocks underperform. Our studies show that when equity markets rally strongly, dividend yield stocks outperform growth and value stocks.'

Source: Business Times – 31 March 2012