What defines a luxury property?

Originally published in Today, this article is posted here with the kind permission of the author Ku Swee Yong (guest contributor), founder of real estate agency International Property Advisor, which provides services to high net worth individuals.

In attempting to describe the top category of residential real estate in Singapore, we often find ourselves struggling with adjectives. Before the Urban Redevelopment Authority came up with the term CCR (Core Central Region), we used to say “9, 10 and 11” in reference to the prime residential postal codes. However, since the frenzy of the 2007 property boom, new terms have cropped up, such as super prime, super luxury, uber luxe, ultra luxury, etc.

Amid the slew of superlatives, Singapore lacks a clear definition of what a luxury property is, one that can be used as a benchmark by which others are measured.

What defines a luxury property?

Many characteristics can, in combination, define a luxury home. These would include location, price, size, furnishings, neighbouring homes, surrounding amenities, interior furnishings, layout, security, etc.

The top characteristic, in my opinion, would be location. If we are asked to name the Beverly Hills or the Knightsbridge of Singapore, we might think of Nassim Road, Ardmore Park, Holland Road, Paterson Road, Grange Road and Orchard Road, among others. If the same question is asked of the foreign investors here, Sentosa Cove, Marina Bay and Orchard Road might feature more prominently.

And within a prestigious neighbourhood, there are often streets that provide a distinction between those who have clearly arrived and those who are merely on their way.

A second characteristic is price or price per square foot of real estate. Knightsbridge, Sloane Street and Belgrave Square in London have been home to Britain’s most expensive residential real estate for the last 200 years and they will continue to lead because the richest people in the world own property there.

According to The Times of London, 14 out of the top 200 most expensive streets in Britain are in Knightsbridge. The world’s most expensive apartment is a penthouse at One Hyde Park, sold for £100 million or over £4,000 psf. That’s over $12,000 psf in early 2007, when the exchange rate was more than £1 = $3.

Singapore’s most expensive homes are in the Orchard Road area. They have been for the past three decades and I believe they will remain so for the next century. Any location elsewhere in Singapore trying to rival Orchard Road will merely serve to push up Orchard Road’s premium.

Economist and real estate investor Alex Shlaen, in the August 2009 issue of Property Report magazine, listed the Top Ten luxurious property projects in Singapore. Except for Sentosa Cove’s villas taken as a whole, and The Sail at Marina Bay, the other eight were condominiums in Orchard Road area.

Sense of space

Beyond location, Mr Shlaen’s key considerations were the condominiums’ furnishings and interiors and facilities. I think interiors and facilities are important factors but space and the immediate environment around a home rank higher on my list.

At the rate Singapore is developing, we are becoming more congested and might soon end up like Hong Kong or Tokyo. A very well decorated and furnished home, in the middle of a congested street where building-to-building distances are at a minimum, cannot be considered a luxury home.

Consider Sentosa Cove, where rows of detached houses stand side-by-side at 2m apart where the eaves of the roofs extend and 4m apart between the houses’ main structures. In most cases, this 4m space is separated by a perimeter wall. Compared to the luxurious space so evident in Victoria Peak in Hong Kong or even Kenny Hills in Kuala Lumpur, the streetscape in Sentosa Cove appears cluttered.

The sense of space gives the home a premium – space outside and space inside. Therefore, shoebox-sized apartments of 300-500 sq ft, even if built in a prime location, are not considered luxury homes.

The low price quantum for these units comes with a premium in terms of relatively higher dollar per sq ft prices, which may or may not be recoverable through higher unit rental rates and limited capital appreciation.

No matter where they are located — in New York’s Tribeca, London’s Knightsbridge, Hong Kong’s Victoria Peak or Singapore’s Orchard Road, these “prime” shoebox units are at best considered serviced apartments or hotel rooms, not luxury homes. Two- or three-bedroom apartments under 1,000 sq ft also fall into this category.

To sum up, the three most important characteristics of a luxury property are, in my view, location, price (quantum as well as unit rate) and space (both inside and outside) — all taken together.

So, for luxury properties, what are the three top street names in Singapore? My votes go to Chatsworth Road, Nassim Road and Bishopsgate. Think tree-lined boulevards, generous space between houses and blocks of condominiums, tranquility and, despite a high percentage of car ownership in these streets, traffic density is low. And, oh yes, crickets chirping, too.

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