EVEN as investors stream back into the luxury property market, causing sales activity to almost double in the second quarter, further price correction may be in the offing given the growing number of unsold homes.
Data compiled by Savills Research & Consultancy showed that there were as many as 4,000 luxury condominiums completed over the past year in Orchard Road, accounting for about 7 per cent of total non-landed stock in the luxury market.
Of this, 16 per cent (over 600 units) remain unsold, bringing total unsold stock in the prime segment to 12,855 units. This comprised 731 completed units and 12,124 uncompleted ones, half of which are ready to be launched.
Prices for non-landed new sales dipped 5 per cent quarter-on-quarter to $2,374 per square foot in Q1 2012, and slid further to $2,230 psf in Q2.
Reflecting the downtrend in prices, 19 units at Paterson Suites were purchased at an average price of $2,619 psf this year - 10 per cent below last year's $2,915 psf and 15 per cent off the peak price in 2007. A total of 12 units at Orchard View changed hands at an average price of $2,604 psf, down 21 per cent from 2010's peak price, while four transactions at St Regis Residences posted the largest drop of 28 per cent from the peak to $2,228 psf in H1 2012.
Savills said the spike in sales activity was observed across all market segments, with new sales up 246 per cent quarter-on-quarter at 235 units in Q2, sub-sales rising 34 per cent to 94 units, and resales increasing 86 per cent over the previous quarter to 585 units.
This pushed the number of units sold to 914, compared with a three-year low of 453 non-landed units sold in Q1, following the eurozone debt crisis and imposition of the additional buyer's stamp duty (ABSD) in December last year.
Specifically, demand for ultra-luxury homes (priced above $3,000 psf) almost trebled from 11 units in Q3 2011 to 31 units in Q2 2012.
These transactions include two units at Scotts Square sold for $4,566 psf in May and another for $4,803 psf in June; a 1,808 sq ft unit on the 52nd storey of The Orchard Residences for $4,399 psf; and two units at Boulevard Vue which sold for $4,326 psf and $3,934 psf.
A newly launched project, Twentyone Angullia Park, also drew keen market interest, with five sales completed over the last three months at prices of between $3,950 and $4,338 psf.
"While these transactions do not mark new highs, they indicate that there is still a reasonable level of demand for luxury homes given the present cautionary mood," noted Savills.
With a looming pipeline of 19,056 units to be completed in the next few years, any price cuts seen in the sector could revive demand and possibly result in sales hitting 1,000 units per quarter until year-end, Savills said.
"More than seven major developments are slated to be launched within the next six months. We could expect moderate take-up of up to 30 per cent in the initial launch period," it added.