What is the outlook for Singapore’s property market in 2004? In this article, we will analyse some of the latest developments to understand what lies ahead.
Singapore is a vibrant island nation that boasts a resilient and modern economy with a dynamic property market. For decades, owning a piece of real estate in the world’s third-largest financial centre has been a cherished dream for many, fuelled by rising property values and a stable political environment.
However, the tides of the market can shift quickly, and after the close of 2023, it’s crucial to understand the current landscape and what lies ahead for potential property investors.
Singapore Property Market In 2024 – An Investment Insights
Singapore’s property market is undeniably intertwined with the nation’s economic pulse. Not only does it constitute a significant portion of the GDP, but it also serves as a key indicator of investor confidence and overall economic health.
Therefore, keeping tabs on the latest trends in both the public and private residential sectors is vital for informed investment decisions. This article delves into the intricacies of Singapore’s property market, dissecting the nuances of both the HDB and private residential segments to unlock valuable insights for 2024 and beyond.
HDB Market: A Tale of Moderation
The Housing and Development Board (HDB) plays a pivotal role in providing affordable housing for the majority of Singaporeans. December 2023 witnessed a continuation of the moderation trend observed throughout the year.
Prices of Housing Board resale flats inched up by 0.6% in December, a slight increase from November’s 0.4% rise. Prices were up 5.8% year in 2023, slower than the 8.8% growth in the previous year.
However, despite the rise in prices, fewer resale flats were sold, with the number falling by 6.2% to an estimated 2,006 units from 2,138 units in November. Compared with December 2022, transactions were down by 10.5%.
This slowdown can be attributed to a confluence of factors, including the introduction of cooling measures in September 2022, elevated interest rates, and a cautious buyer sentiment amid economic uncertainties and a ramp-up of supply of new BTO flats.
Meanwhile, 470 flats were sold for at least $1 million each in 2023, about 27% more than 2022’s record of 369 million-dollar flat transactions. Such flats accounted for 1.8% of HDB resale transactions in 2023.
The increase in resale HDB flats sold above $1 million could be attributed to buyers looking for housing without significant restrictions in attractive locations. From the October 2024 BTO launch, flats in choicer locations will fall under the Prime and Plus categories, which come with stricter resale conditions such as a 10-year minimum occupation period and subsidy clawback.
The new HDB flat classifications were first announced by Prime Minister Lee Hsien Loong during his National Day Rally speech on 21 August 2023.
Looking ahead to 2024, HDB resale prices are forecast to grow modestly at a rate of 3-5%, easing from a growth of 5.8% growth last year and 8.8% in 2022.
Private Residential Market: Navigating Uncertainties
The private residential market, similarly, saw a sharp decline in activity in December 2023. New home sales (excluding executive condominiums) plummeted to a 15-year low of just 135 units, marking a stark 82.8% decline from November’s figures. It also marked the lowest monthly sales figure since January 2009 following the 2008 financial crisis, brought about by the collapse of Lehman Brothers, when 108 new units were sold.
Developers launched just 36 new units for sale in December – a six-month low since June 2023, when 31 units were released – down from 970 units in November.
On a yearly basis, sales were down 20.6% from 170 units in December 2022. Including ECs, new home sales were down 81% to 152 units.
For the full year, 18,510 units were transacted, down 15% from the 21,890 units sold in 2022. It is also the lowest annual sale transaction volume since 2016, according to the URA. The figure comprises new sales, resales and subs-ales, and excludes executive condo units.
This drastic drop in December 2023 can be partially explained by the limited new project launches and the usual year-end lull. It can also be attributed to buyers’ resistance to higher prices amid downbeat macroeconomic conditions, several rounds of property cooling measures, elevated interest rates and ample new housing options.
As a result, private home prices continued to moderate for a second straight year, growing at a slower pace of 6.7% last year compared with 8.6% in 2022 and 10.6% in 2021.
Much of 2023’s price rise was fuelled by the non-landed housing market in the suburbs (Outside Central Region), where prices rose 13.8% during the year. The price gains far outpaced prices in the city fringe areas or Rest of Central Region which rose by 2.7%, and prime Core Central Region which were 2.1% higher year on year.
Lower sales volume in 4Q 2023 and for the year, as well as the slower price gains outside the OCR, showed increasing buyers’ resistance to already high prices.
Compared with pre-pandemic levels (at Q4 2019), CCR, RCR and OCR non-landed prices are cumulatively up by 11%, 37% and 40%, respectively.
Nevertheless, healthy household balance sheets, as well as a likely decline in mortgage rates towards the end of the year, will help to prop up the Singapore property market in 2024. As can be seen, in 4Q 2023, Singaporeans and permanent residents accounted for 98.5% of private home buyers, while foreigners accounted for just 1.5%.
The drastic drop in property purchases by foreigners follows a hefty hike of additional buyer’s stamp duties from 30% to 60% in April 2023.
Looking ahead to the Singapore property market in 2024, we expect private housing prices to slow further to a range of 3-5%. However, those looking for a significant correction in the private residential market will likely be disappointed due to resilient household balance sheets and low unsold inventory.
Government Policy Tweaks
In addition, pro-active government policies will help to keep prices at an even keel. For example, during the government land sales (GLS) tender for the Marina Gardens Crescent white site that closed on Jan 18, it attracted only one bidder.
A consortium comprising GuocoLand, Hong Leong Holdings and TID (a joint venture between Hong Leong Holdings and Japanese developer Mitsui Fudosan) submitted a bid of $770.46 million for the 1.73ha 99-year leasehold site. This translates to a land rate of $984 psf per plot ratio (psf ppr), nearly 30% below that for the neighbouring Marina Gardens Lane site, which was awarded in July 2023 to Chinese developer Kingsford Huray Development and its two partners at $1.03 billion, or $1,402 psf ppr.
Hence, it will be a surprise if the URA awards the site as this will put significant pressure on the value of upcoming developments in the area. These include the nearby Marina Gardens Lane plot, Marina View Residences, Skywaters Residences and Newport Residences – which can collectively offer about 1,900 new homes.
For Government Land Sale sites, the reserve price is pegged to 85% of the estimated market value as assessed by the Chief Valuer, taking into consideration factors such as the proposed land use, site conditions, and comparable sales transactions.
Charting the Singapore Property Market in 2024 and Beyond
The outlook for the Singapore property market in 2024 remains clouded with some degree of uncertainty. Several key factors will influence its trajectory, including:
Government Policy: The government’s stance on property cooling measures will play a crucial role. If additional measures are implemented, they could further dampen market activity. Conversely, any policy tweaks aimed at boosting affordability could revitalise demand.
Economic Conditions: The global economic climate, particularly the performance of key trading partners like the US and China, will impact Singapore’s economic growth and consequently, the property market.
Interest Rates: The trajectory of interest rates will be a critical determinant of mortgage affordability and buyer sentiment. Continued hikes could price out potential buyers, while stable or declining rates could stimulate market activity. However, given the struggles of the world’s two biggest economies – the United States and China – interest rates have likely peaked and could see a decline as the year progresses.
Despite the uncertainties, some potential opportunities beckon for discerning investors. The continued demand for properties (both public and private housing) presents a promising avenue for investment, particularly in well-located locations with good amenities and close to good schools.
Additionally, attractively priced properties that will benefit from potential transformation under the URA master plan could offer opportunities for capital appreciation in the long run. Some of these areas include the Greater Southern Waterfront, one-north, Jurong Lake District, and Woodlands Regional Centre.
Conclusion: Knowledge is Power in the Real Estate Game
Navigating the complexities of the Singapore property market in 2024 requires careful consideration of the latest trends, data-driven insights, and a keen understanding of the economic and policy landscape.
I hope that this article has equipped you with some valuable knowledge to make informed investment decisions in the ever-evolving Singaporean real estate scene. Remember, staying abreast of market developments and seeking professional advice from a qualified real estate agent will be crucial in identifying properties that meet your needs and investment horizon.
Please WhatsApp me if you require an update on Singapore’s residential property market.