Singapore’s $110,000-a-month mansion market is going out of business

(Bloomberg) — Luxury housing deals are drying up in Singapore as the market is hit by one of the country’s biggest-ever money laundering scandals.

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High-end cottage sales are expected to have their worst year in nearly a decade, with just eight sold by the end of September, according to data compiled by Knight Frank. Realstar Premier Group Pte, an agency that specializes in pre-owned homes, says that in September it sold less than half of the 10 properties it normally brokers each month.

The drying up of transactions follows money laundering investigations into a group of people of Chinese origin, a significant increase in taxes on foreign buyers and higher interest rates. Demand for renting mansions, which previously reached up to S$150,000 ($110,000) a month, has also declined, as the wealthy think twice about luxury homes in the city-state.

“The recent anti-money laundering crackdown by the Singaporean police force has distorted the luxury real estate market,” said Louis Cha, CEO of List Sotheby’s International Realty. “It will take some time for the dust to settle and the market to forget this negative image of luxury real estate.”

Knight Frank’s figures do not include undisclosed transactions, but the eight mansions sold compared with 20 last year. This is a small fraction of the 60 units transacted in 2021, representing an 80% decline from that year’s sales of S$2.1 billion. Low numbers have not been seen since 2014, when S$431 million worth of these assets were purchased.

Sellers, realtors, and agents have become wary and are using more stringent background checks — and in some cases, effectively rejecting deals from potential clients.

The owner of a so-called good class bungalow rejected a potential tenant from China’s Fujian province despite that person’s offer to pay five years’ rent in advance for the S$100,000-a-month house, a person familiar with the matter said, requesting not to be named discussing private information. Authorities revealed that most of the suspects arrested in the money laundering case hail from Fujian.

While the Estate Agencies Council of Singapore advises against placing advertisements that are discriminatory or stereotypical in nature against any race or group and warns of taking disciplinary action against estate agents who violate the guidelines, there are no laws that specifically penalize landlords for refusing rent on these grounds. CEA did not respond to a request for comment.

Potential buyers are also “taking a wait-and-see attitude as to how the market will play out in terms of pricing and the full extent of the investigations and sanctions that will be imposed,” said Jennifer Shea, a partner at TSMP Law Corp., who is leading the potential buyers. The company’s real estate, banking and financial practices.

The reserve of luxury bungalows and good class refers to mansions of at least 1,400 square meters (15,100 sq ft), often located in the most exclusive neighbourhoods. At least half of the ten detainees took such accommodation. Among them, Su Paulin stayed in a mansion on Nassim Road, a very exclusive area that housed many embassies.

Co-accused Fang Xueming lived in a villa with a large rooftop pool and gym, located in a leafy area called Bishopsgate near Singapore’s main shopping belt. Rental data released by the government shows he paid at least S$150,000 a month in November 2020 to live in the property, a record at the time.

Realstar managing director Julian Yip said that after the money laundering case, “it is not easy to find anyone who spends more than S$100,000 a month.”

Interest rates, rising costs and higher taxes have also limited buyer interest. Bungalows are generally restricted to local buyers – unless the government provides special approval – meaning foreigners often pay exorbitant rents for such properties.

“With increasing interest rates and uncertainty, buyers are becoming more cautious,” said Leonard Tay, head of research at Knight Frank Singapore. “Overall price increases from 2020 have also made these luxury properties more expensive to purchase.”

-With assistance from Kevin Farley.

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