When it comes to the best and worst property markets in Asia, Singapore has it covered.
Office rents in the city’s central business district jumped 14 percent last year, the biggest increase in the region, while luxury home prices slumped 6 percent, the most in Asia, according to Jones Lang LaSalle, a property brokerage and consulting company.
The gap is about to widen. Prime office rents in the city, Asia’s most expensive after Hong Kong and Beijing, are projected to extend the gain by a further 5 percent this year with a limited supply, said Chua Yang Liang, Jones Lang LaSalle’s head of research for Singapore and Southeast Asia. High-end homes may post a decline similar to the drop in 2014 on the government’s housing curbs, he said.
“Singapore has seen quite a polarity in its property market compared to the rest of Asia,” Chua said in an interview. “As long as the government curbs on housing are in place, we will continue to see this diverging trend.”
The city’s prime office rents are set to extend gains this year with a limited number of new commercial properties, Lynette Leong, chief executive of CapitaCommercial Trust, said in an interview last month.
The property trust is building the 40-story CapitaGreen office tower in the city’s financial district and has leased more than two-thirds of the building, she said.
About 1.15 million square feet (107,000 square meters) of new office space will come on stream in 2015, rising to 1.6 million square feet in 2016 and 4.7 million in 2017, according to real estate broker Knight Frank.
Grade-A office rents may climb 11 percent this year as a dearth of supply until mid-2016 helps boost leases, said Alan Cheong, a Singapore-based director at broker Savills Plc.
“The coast is clear for a rise in office rents,” he said, at the same time predicting a drop of as much as 10 percent for residential values this year.
Singapore’s home prices fell 4 percent in 2014, the first year-on-year decline since the 2008 global financial crisis, according to government data. The slump came as Singapore added more measures to its five-year campaign to rein in property values with some of the strictest measures, including capping total debt repayments at 60 percent of a borrower’s income.
In November, City Developments, Singapore’s second- biggest developer, said the high-end residential segment may face “fire sales” with mortgage defaults as the housing curbs hurt home sales and prices.
The developer, controlled by billionaire Kwek Leng Beng, reiterated that the housing measures have “adversely impacted” home sales and prices. The company is expecting prices to fall further with the measures, tighter credit, supply of new homes and the possibility of higher lending rates.
“Headwinds are expected to persist for the Singapore market and the global economy remains fragile,” Kwek, who’s chairman of City Developments, said in a statement on Monday. “We remain poised to capitalise on this down cycle by building on our capabilities.”
The company is benefiting from the pickup in office rents with an average occupancy rate of 97.2 percent, it said. Its 34-story South Beach joint venture across from the historic Raffles Hotel has already leased 80 percent of the 500,000-square-foot space in its office tower ahead of its completion in the fourth quarter, anchored by Facebook, it said.
Keppel Land, Singapore’s third-biggest publicly traded residential developer, also said last month the city’s housing market remains “challenging” after new home sales halved in 2014 with falling prices. The company said it has started seeking out investments in developed countries such as the US.
Home sales may stall in 2015 as growth slows. Singapore’s economy expanded less than estimated in the fourth quarter after its manufacturing industry weakened with slowing growth in China and an uneven global recovery.
Gross domestic product rose an annualized 1.6 percent in the three months to Dec. 31 from the previous quarter, when it expanded 3.1 percent, the trade ministry said in a preliminary report last month. The final data will be released on Tuesday.
“Singapore would be among the few countries where prices are contracting compared to the rest of Asia where economies are expanding,” said Nicholas Mak, executive director at SLP International Property Consultants. “Had it not been for the government curbs, Singapore may have outperformed the rest of Asia in terms of pricing.”
Singapore remains a high-end housing market in Asia. The city was ranked the most expensive city to buy a luxury home after Hong Kong in the region, according to a 2014 Knight Frank wealth report.
Foreigners, who have previously made up a third of all purchases in Singapore’s prime residential areas, will shy away from the city-state with the additional taxes on home purchases, said Cheong at Savills, adding that the levy on overseas buyers has added as much as 18 percent to their costs.
“Luxury homes will face challenges to lure the overseas buyers back as they are loathe to pay the additional taxes,” he said.