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Price gap between luxury and mid-tier private homes narrows significantly, proportion of local buyers may rise

Following the latest round of property cooling measures introduced by the government—which sharply raised the Additional Buyer's Stamp Duty (ABSD) for foreigners purchasing residential property from 30% to 60%—analysts generally believe that this could dampen foreign buying sentiment, leading to slower price growth for luxury private homes this year.

Over the past five years, the price gap between luxury and mid-tier private homes has narrowed significantly, shrinking from 56.5% to 16.9%. At the same time, the proportion of local buyers purchasing luxury homes has been steadily climbing.

With the rollout of the new cooling measures, analysts surveyed generally anticipate price growth in luxury private homes to moderate, while more locals are expected to 'upgrade' into the luxury segment.

According to data from Huttons Research, prior to the COVID-19 pandemic, the median price per square foot (psf) for new launches in the Core Central Region (CCR)—which represents luxury private homes—rose from $2,717 in 2018 to $2,912 by late April this year, an increase of around 7%. In comparison, the median psf in the Rest of Central Region (RCR), representing mid-tier private homes, rose from $1,736 to $2,491 over the same period, marking an increase of 30%.

As price momentum for mid-tier private homes outpaced that of luxury properties, the price gap between the two segments has continued to shrink.

The faster price appreciation in mid-tier private homes was largely driven by a higher number of new mid-tier project launches, as well as robust demand from upgraders.

While prices of new mid-tier homes climbed substantially, resale private home prices lagged behind, as resale properties typically catch up with new launch benchmark prices at a slower pace.

Foreign buyers generally gravitate towards luxury private homes. In the first quarter of this year, foreigners bought 159 luxury private homes, up 123.9% year-on-year, accounting for 62.3% of all luxury home transactions—a notable rise from 49.0% a year earlier.

Following the government's late-April cooling measures, which doubled the ABSD for foreign buyers from 30% to 60%, analysts surveyed widely expect foreign buying sentiment to take a hit, resulting in slower price growth for luxury private homes this year.