SINGAPORE: SC Capital Partners made a startling comment about Singapore property prices in an interview recently, saying prices here are “too costly”.
The firm, which made a loss from the sale of 18 units at Patterson Suites to Blackstone Group LP earlier this year, said property prices in Singapore “need to drop another 30 percent”.
The Asian property fund’s founder, Suchad Chiaranussatti, said he won’t be entering the Singapore residential market again until he sees a further 20 percent to 30 percent drop in prices.
SC Capital, which manages $1.8 billion in real estate assets, booked S$12 million in losses from the Patterson Suites investment.
The units were sold to Blackstone Group in January 2015 at S$2,100 a square foot from a cost price of about S$2,300 in 2011.
“We bought in 2011 and then the policies came in,” Chiaranussatti said, referring to the slew of property cooling measures introduced by the government, including the 15% additional buyers’ stamp duty (ABSD) for foreigners and companies. “The intensity and the severity of the policies caught us by surprise.”
However, Blackstone’s CEO Steven Schwarzman is confident that Singapore’s cooling measures will be relaxed over time, which will slowly generate demand again.
Savvy Investors Are Quietly Snapping Up Bargains
As it stands, prices of many developments in the Core Central Region (CCR) have already dropped by 20 percent to 30 percent from their peak.
Some of the high profile losses include Japanese billionaire Katsumi Tada’s penthouse at St Regis Residences, which booked an eye-popping loss of $15.8 million when he sold the apartment in February 2015.
Mr Tada forked out $28 million or $4,643 per sq ft (psf) for the unit in 2007, but sold it at a mere $2,028 psf, booking a enormous loss of 56%.
In March 2015, a 2,626 sq ft unit at The Coast at Sentosa Cove, went for just $3.125 million – or $1,190 psf, translating to a loss of 28% for the owner.
This set a record low for recent transactions in Sentosa, typically home to multi-millionaires.
In fact, prices in the high-end property market have gone so low that they are starting to attract the attention of well-heeled buyers again.
Indian-born Harish Manwani – global executive adviser at Blackstone and former chief operating officer at Unilever – reported paid S$11.8 million or S$2,129 psf for a 5,543 sq ft apartment at St Regis Residences in April.
A China buyer bought a 3,520 sq ft unit on the fourth floor of Corals at Keppel Bay for S$10.42 million – or S$2,960 psf last month in May.
In the case of the mass market segment, Barclays said in a report it expects “prices of mass market homes to hit bottom by mid-2016, falling by another 10 percent”.
The reports added that “we see the likelihood of a reprieve from the unwinding of property tightening measures happening after the general election, which has to take place by May 2016.”
Comparing Singapore’s Valuations to Hong Kong and London’s
Well-traveled international buyers are finding valuations in Singapore’s high-end condo market “very compelling“, especially when compared with those in Hong Kong and London, according to Savills Singapore research head Alan Cheong.
For instance, in Hong Kong, a 4,664 sq ft penthouse unit at 39 Conduit Road was sold in April for HK$92,857 psf or S$15,800 psf.
In Singapore, the highest price transacted in 2015, based on URA records, was S$3,676 psf for a 13,875 sq ft penthouse in Le Nouvel Ardmore.
Even more amazing thing is that 39 Conduit Road has only 50 years of lease remaining, while Le Nouvel Ardmore is a freehold condo.
Comparing to London, in May last year, a penthouse at One Hyde Park, was reportedly sold for £140 million, translating to £8,750 psf or S$18,462 psf.
This compares to the highest psf in Singapore last year of S$4,626 psf for a 2,755 sq ft unit at Reignwood Hamilton Scotts.
“It is therefore a no-brainer for the well-heeled to start refocusing their attention here because Singapore is still on their map as a key gateway city,” said Mr Cheong.
So Can Prices Really Drop by Another 30%?
So the question remains – can prices drop by another 30%?
A quick calculation reveals that a 30% drop would mean prices at Patterson Suites crashing from $2,100 psf to just $1,470 psf.
This is even lower than some of the mass market prices currently, and quite unimaginable to say the least, especially when viewed from the global investor’s perspective.
SC Capital was “caught by surprise” and was wrong once, and they may well be wrong yet again.