luxury real estate
|

Singapore Luxury Real Estate: Top Destination for Property Investment

Bytyson yuk

Singapore’s luxury property market has been bullish in the past few years. Despite cooling measures implemented by the Singapore government in 2018 to control property prices, market demand for its luxury properties remains strong. Here are some key things you should know about the Singapore luxury real estate market.

Content

What is considered “luxury” in the Singapore property market? 

Luxury real estate is generally defined as residential property that costs beyond a certain threshold and has certain qualities above what is typically offered in more mainstream or mass-market segments. Commercial property in Singapore is largely excluded, unless you consider residential shophouses, which are considered commercial property despite their flexible use.

Strictly speaking, the definition of a “luxury” home is subjective and can vary depending on the individual’s wealth and preferences.

For our purposes, we consider the threshold to be S$10 million. The qualities that you would likely see in Singapore luxury real estate include the following:

  • homes in prime locations
  • part of exclusive, gated communities
  • spacious and large houses
  • inclusion of and proximity to high-end amenities and facilities
  • What are the risks associated with investing in Singapore luxury real estate?

Luxury real estate market growth in Singapore

Singapore’s luxury real estate market has been growing steadily in recent years. According to Mordor Intelligence, this market segment is expected to grow by 3% CAGR during the forecast period of 2022-2027.

Meanwhile, Statista estimates that Singapore’s inflation rate for the same period goes down from a decade-high of 3.49% in 2022 to 1.48% in 2027. This shows that the luxury property market growth will outstrip inflation after the current year, earning investors a healthy net profit in the foreseeable future.

luxury real estate
Image credit: Statista

Bungalows as a key luxury property market segment

Buying property in the fastest-growing segments of Singapore luxury real estate can also deliver higher net profits. Among the rising stars is the Good Class Bungalow (GCB) class, the pinnacle of luxury housing in Singapore. Its current average PSF of S$1,839 in H2 2021 has seen a rise of 25.3% over the same period in 2020.

GCB buyers have historically been older and more established professionals such as doctors, attorneys, and entrepreneurs. Recently, GCB buyers now include younger entrepreneurs and professionals, as well as those from wealthy families or who have recently become wealthy citizens of Singapore. Additionally, parents are increasingly purchasing GCBs under trusts for their children who are still minors.

The expansion of GCB buyers is due, in part, to the growth of the digital economy and an influx of young wealthy tech businessmen. Compared to older generations, younger people tend to be less conservative in spending and are willing to spend lavishly on assets as a symbol of wealth and social status.

UNHNWI as a critical driver of luxury real estate demand 

A PWC report mentioned that the Singapore real estate market regularly tops the rankings among its regional peers, making it one of the top destinations for investment prospects in the Asia Pacific. This shows the mind share Singapore holds as a port-of-call for cross-border investments.

According to a report by Knight Frank, 17% of the world’s almost 200,000 ultra-wealthy individuals (termed UHNWI – those with net assets of US$30 million or more) prefer buying luxury real estate in Singapore in 2019-2020. This rise is expected to continue, with Singapore UHNWIs estimated to grow by a whopping 268% between 2021 and 2026. By then, the population of the ultra-rich in Singapore would be around 6,000.

Market sentiment in Singapore’s luxury property sector

The city-state is a haven for wealthy individuals from other parts of Asia and the world looking to invest their money in property. The increased demand for Singapore luxury real estate is driven by many factors, including the city’s stable political environment, strong economic growth, and attractive tax incentives.

The ultra-wealthy are drawn to Singapore because our wealth, income, and estate taxes are low by global standards. In fact, not only do investors save on taxes, but capital gains are untaxed as well. The maximum personal income tax rate is a mere 22 percent.

UHNWIs, especially those who have converted to Singapore citizens, are often attracted to landed homes with more square footage near parks or other amenities.

Elderly homeowners looking to retire would also be good sources of profit, as they may want to sell their property and downsize as they age. The cost of maintaining a large home can become challenging to handle when someone is retired and on a fixed income.

What are the risks associated with investing in Singapore luxury real estate?

Like any investment, there are risks associated with investing in Singapore luxury real estate. These risks include the potential for property prices to fall, the possibility of the Singapore government introducing new cooling measures, changes in government policies, and the possibility of Singapore becoming less attractive to wealthy individuals from other parts of Asia.

Despite these risks, Singapore’s luxury real estate market is expected to grow in the coming years. Timing the market is not advised in investing circles, but there is no time like the present to make your move.

Buying property at a time when high inflation seems to be holding back overall market growth would be akin to buying when prices are in a slump. Per Statista, inflation is forecast to fall to lower levels after 2022, and you would be well placed to benefit from market forces if you purchase your new luxury home at this time and hold it through the coming years.

Start your luxury property investment today

The luxury real estate market is a top destination for property investment in Singapore. The market is driven by several factors that benefit its current and future prospects. Despite some risks, the market is expected to continue growing in the coming years. 

If you’re thinking of investing in Singapore luxury real estate, it’s crucial to seek professional advice to ensure that you’re making a sound investment.

I am Tyson Yuk, the founder of the blog Commercial Realty Singapore. With over 15 years of experience, my forte is in the commercial and luxury property line. With my blog, I aim to educate, advise and share tips and tricks with potential property buyers and investors to help them make successful property ventures.

For more information on Singapore’s real estate market, I can provide you with the most up-to-date information and connect you with the best properties on the market.

Let’s have a chat to find out if luxury real estate is the right investment for you.

Book a free consultation with me