Defying gravity: Luxury homes in the spotlight as prices tick up

Investors are keen on cheap homes.

For the first time in over two years, luxury home prices in Singapore managed to eke out a 0.4% gain in the first three months of 2016. Flash estimates from the Urban Redevelopment Authority (URA) showed that prime home prices rose even as price declines in the mass-market segment intensified, indicating the emergence of two-speed market in Singapore.

Experts reckon that the surprising price growth occurred due to growing investor interest in the high-end residential sector, which has been hardest hit by several rounds of stringent cooling measures.

"The recovery seen in high-end home prices for 1Q 2016 indicates a return in interest for the luxury segment as opportunities for value-buys increase," Knight Frank Singapore said in a report.

Ong Teck Hui, National Director, Research and Consultancy at JLL, noted that the price increase was also on back of robust sales take-up for Cairnhill Nine, which was launched for sale in March.

"[This] attests to the underlying pent-up demand which surfaces when buyers perceive an attractive investment opportunity. After softening 4.1% in 2014 and 2.5% in 2015, it is possible to see a gentler decline in the CCR non-landed index in 2016," Ong said.

He added that prices of mass-market homes in outlying districts, as well as prices of landed properties, could soften at a higher pace this year. Prices in these market segments have declined less significantly compared to prices of non-landed homes in the Core Central Region (CCR) and the Rest of Central Region (RCR).

"Nonetheless, amidst the prevailing economic uncertainties and muted market sentiment, prospective investors and homebuyers are expected to remain cautious while maintaining their interest to secure highend homes, resulting in slight declines or at best moderate q-o-q increase for CCR home prices. Prices in the CCR are expected to register -0.2% to 0.3% q-o-q change for Q2 2016," Knight Frank said.