_Is it time to revive branded residences in Singapore?

Branded residences in Singapore first appeared in 2008 with the development of St. Regis Residences. Since then, only three more have been added, with the latest—Pullman Residences—expected to be completed at the end of 2024. IOI Properties is expected to launch the next offering—W Residences Marina View—in 2025. The former AXA Tower, redeveloped as 8 Shenton Way, could also feature a limited number of Aman-branded residences.

To the well-heeled, branded residences represent the pinnacle of luxury living, seamlessly blending the comforts of home with the impeccable service of world-class hotels. For discerning buyers, these properties offer an unparalleled lifestyle experience, combining the privacy and ownership of a high-end residence with the amenities and prestige of renowned hospitality brands.

Options, such as housekeeping and even pet services, are available on demand. At the same time, buyers are automatically included in loyalty programmes, which grant access to free or discounted stays across the hotel’s network.

As noted in Knight Frank's latest Horizon Report – Quality Life-ing, which maps out prime residential hotspots in the Asia-Pacific, there has been a conspicuous shift towards branded residences in the region. Markets in Australia, India, Vietnam, and Thailand are seeing rising demand for such projects, appealing to local and international investors who value secure investments and the elevated lifestyle these residences provide. In Asia-Pacific, at least six branded residences will be completed over the next four years.

The trajectory of branded residences in Singapore presents an interesting case study of initial success followed by stagnation. The St Regis Residences exemplified the early potential of this luxury real estate segment in the city-state, attracting significant foreign interest and generating impressive returns for investors.

The project's initial launch saw 65% of foreign buyers among the first 58 units sold, representing 34% of the total units. The investment potential was further highlighted by a notable transaction involving a two-storey penthouse at St Regis Residences. The owner of this unit achieved an extraordinary profit of $12.77 million in just eight months, selling the property for $28 million. This sale set a new record price of $4,653.5 psf, demonstrating the premium that buyers were willing to pay for branded luxury residences.

However, despite this promising start, the growth of branded residences in Singapore has since slowed considerably. Since 2011, only one additional project in this category has been launched, indicating a significant deceleration in the sector's expansion.

The Additional Buyer’s Stamp Duty (ABSD) levied on Permanent Residents (PRs) and Singaporeans purchasing their second and subsequent properties has evidently depressed sentiments. The rates for foreigners have been particularly severe, increasing from 10% in 2011 to the current rate of 60%. Additionally, the introduction of ABSD for developers has also led to more conservative development concepts.

Price declines bottoming

The trajectory of branded residences in Singapore, particularly exemplified by the St. Regis Residences, reveals a complex narrative of initial success, subsequent decline, and recent signs of stabilisation. Launched in 2006, the St. Regis Residences project spans a period encompassing the pre-Global Financial Crisis boom, the crisis itself, and an era marked by aggressive cooling measures in Singapore's property market.

In its early years, the St. Regis Residences project demonstrated significant potential for property flippers. Investors during this period reaped healthy profits, with average returns of 15.4% above the initial selling prices.  

However, the landscape shifted dramatically in the following decade. Transactions during this period predominantly resulted in losses, with an average decline of 5.7% from the original purchase prices. This downturn coincided with the Singapore government's implementation of increasingly stringent stamp duties to cool the property market and to curb speculation. These measures particularly impacted the luxury segment, including branded residences, which traditionally relied heavily on foreign investors and buyers of second properties.

Despite this challenging period, recent trends suggest a potential bottoming out of price declines and even tentative signs of recovery. A notable example of this potential turnaround is when a unit at St. Regis Residences was sold at 6.1% higher after a 13-year holding period.

In January 2024, a spacious 3,057-square-foot (sq ft) unit on the 33rd floor of the Ritz Carlton Residences in Cairnhill changed hands for an impressive $16.5 million, equating to $5,397 psf.[1] According to caveats lodged with the URA, the previous owner had acquired the unit in February 2016 for $11.6 million, or $3,795 psf. Over the approximately eight-year holding period, this transaction resulted in an annualised profit of 4.5%.

The Ritz Carlton Residences, situated in the coveted Cairnhill locality with a freehold tenure, sets it apart from other luxury developments. The contrast is stark, with Sentosa properties struggling in recent years, with slower sales and price depreciation being common issues. However, the recent exercise of offloading remaining unsold units at significant discounts – reportedly up to 40% - is likely to establish a floor to prices and could mark the beginning of a market correction that may ultimately lead to a more balanced and sustainable luxury real estate landscape in Singapore.

Rising wealth fuels interest

The renewed interest in branded residences in the last few years is closely tied to the significant growth in the ultra-high-net-worth and high-net-worth populations, both regionally and globally. Knight Frank's The Wealth Report 2024 projects a 15.7% growth in this affluent demographic through 2028, following a strong 4% increase in 2023. This surge in wealth is driving demand for luxury real estate, particularly in safe-haven destinations like Singapore.

The city state’s position in the global wealth management landscape is set to strengthen further.  Boston Consulting Group forecasts that financial wealth booked in Singapore will grow at an impressive 9% annually through 2027, positioning it among the top three wealth management hubs globally, trailing only Hong Kong and Switzerland.

Asia-Pacific's role in global wealth generation is becoming increasingly prominent. The region is expected to account for nearly 40% of the projected 28.1% growth in the world's UHNW population (individuals with over US$30 million) through 2028. This concentration of wealth creation in Asia-Pacific is unmatched by any other region globally.

The rise of Singapore family offices (SFOs) is particularly noteworthy. Deloitte Private predicts that SFOs will manage assets exceeding US$5.4 trillion by the end of the decade, surpassing the assets under management of hedge funds. Approximately one-fifth of these assets are expected to be concentrated in the Asia-Pacific region, a testament to the area's economic growth and transformation over recent decades.

Important add to the luxury segment

This concentration of wealth has allowed branded schemes to steadily gain traction in several regional markets. What was once exclusive to metropolitan areas such as New York City and London is now emerging in markets such as Bangkok, Ho Chi Minh City and even Phnom Penh. This trend is also expanding beyond hotel brands to include partnerships with luxury automotive and fashion labels, as well as renowned designers and architects. These collaborations enable developers to differentiate their offerings further.

A prime example of this trend is the Porsche Design Tower Bangkok, the first Porsche-branded residence in Asia. This ultra-luxury development features just 22 apartment units, valued between US$15 million and US$40 million. The project includes 20 duplexes and two quadplex penthouses known as Sky Villas, often considered "collectibles" by wealthy investors. This blend of hospitality, design, and lifestyle demonstrates the potential for a more vibrant and diverse luxury segment.

Exhibit 3: Newly launched branded residences in Asia-Pacific

Singapore's status as a wealth hub makes diversification in its luxury real estate offerings crucial to align with global trends. Comparatively, New York City boasts over 30 branded residence schemes, while London has nearly 20. Dubai, another emerging wealth hub, currently has 60% of the world's pipeline of branded schemes under construction. This global context underscores the potential for growth in Singapore's branded residence market.

According to Knight Frank’s Global Branded Residences Report, up to 45% of buyers in Australasia are willing to pay a premium for branded residences, highlighting the growing potential in this segment. With an established luxury segment against which to compete, premiums commanded by branded residences in Singapore are tighter, which offers a value proposition.

The proliferation of branded residences has the potential to reshape how the wealthy live and invest. Singapore may need to consider aligning more closely with this global trend to maintain its competitive edge as a global wealth hub. While the city-state already offers world-class luxury real estate and remains an investment magnet, easing barriers or implementing targeted policy reviews could create a more conducive environment for branded residences to thrive.

By fostering the growth of the branded residence segment, Singapore could enhance its appeal to affluent buyers who value exclusivity, convenience, and lifestyle offerings. These developments are more than just homes; they are symbols of aspiration and quality that could contribute significantly to Singapore's luxury real estate narrative while complementing its broader vision as a global wealth hub.

A strategic revival of the branded residence segment in Singapore could diversify its luxury real estate offerings and reinforce its position as a competitive global player in this niche market. As the concept continues to evolve and expand globally, Singapore can leverage its reputation and infrastructure to create a unique and compelling proposition for the world's ultra-high-net-worth individuals seeking premium residential experiences.