Savills Predicts Luxury Home Rates Drop (21 Nov 2008)

Rates on super luxury homes as well as high-end units are expected to drop more than 20 percent in the next five quarters, according to Savills Singapore. The firm also added that declines of 12 percent and 14.3 percent on the respective segments would eventually follow in the first three quarters of 2008.

This forecast is the most controversial announcement that the firm has ever given yet other firms affirmed on this estimation.

Savills reported that the segments affected – the super luxury and the high end houses – are fragile to the gradually-decreasing global investments.

According to the said report, the average capital value for the non-landed high-end units during the fourth quarter of 2007 was S$2,410 per square foot (psf). However, the value fell to a whopping S$2,065 psf during the third quarter of 2008 which was 14.3 percent lower than the aforementioned rate.

On the other hand, the average capital value for super luxury homes (non-landed) slided down to S$3,240.40 psf in Q3 2008 which was 12 percent below the Q4 2007 rate.

Though the firm expects that rates in the two segments would drop to 5-8 percent in a year’s span and a quarter, Savills assured that the growth of HDB flat owners who would upgrade their units will, at least, provide a certain amount of force.

In addition to the leverage provided by the stable support to HDB upgrade by homeowners, Savills also listed the increase in rental demand would also weaken in the coming year. Leasing head of Savills Patrick Lai commented, “The inflow of expats is expected to slow down, although we're still seeing an influx of foreign talent into Singapore, particularly in the healthcare, pharmaceutical, R&D and logistics industries.”