Following strong growth in the second quarter, the increase in private home prices slowed to 3.8% in the third quarter, mainly due to a 4.4% rise in non-landed private home prices.
Real estate statistics released by the Urban Redevelopment Authority (URA) on Friday (Oct 28) show that the overall Property Price Index rose from 180.9 in the second quarter to 187.8.
Non-landed private home prices increased by 4.4%, up from 3.6% in the previous quarter. In the Core Central Region (CCR), prices of non-landed private homes rose by 2.3%, compared to 1.9% in the last quarter. The Rest of Central Region (RCR) saw a 2.8% increase, down from the 6.4% jump in the second quarter. The Outside Central Region (OCR) experienced the largest price increase for non-landed private homes, rising by 7.5% in the third quarter, up from 2.1% in the previous quarter.
Overall, in the first nine months of 2022, private residential prices jumped by 8.2%, higher than the 5.3% increase during the same period in 2021.
Leo Kwek, a senior local property agent at Anjia SG, said: “By market segment, the suburban or Outside Central Region saw the largest price increase at 7.5%, the highest quarterly increase since the third quarter of 2009,” when the increase was 16.1%.
Leo stated that the price hike was likely driven by three major projects launched in the region during the third quarter—AMO Residence, Lentor Modern, and Sky Eden@Bedok.
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In the third quarter of this year, prices of landed private homes rose by 1.6%, compared to a 2.9% increase in the previous quarter. Resale transactions accounted for about 60.5% of all sales transactions in the third quarter. The total volume of resale transactions was 3,719, down from 4,236 in the previous quarter.
Leo said that fewer people purchased private homes this quarter due to “rising interest rates and price hikes,” pointing out that URA data showed private home sales fell by 9.7% in the third quarter of this year compared to the second quarter.
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Rents Reach Largest Quarterly Increase Since 2007
Following a 6.7% rise in the previous quarter, overall private home rents grew by 8.6% in the third quarter, setting a new high.
Leo said that rents increased by 20.8% in the first nine months of the year, and as the quarterly rental increase soared to its highest since the third quarter of 2007, “tenants’ budget ceilings have also been pushed up.”
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In the third quarter, rents for non-landed private homes in the Core Central Region (CCR) increased by 7%, compared to 7.7% in the previous quarter. Rents in the Rest of Central Region (RCR) rose by 9.6%, up from 5.9% in the last quarter.
Rents for non-landed private homes in the Outside Central Region (OCR) grew by 8.8%, up from 7.7% in the previous quarter, while rents for landed properties increased by 10.9% in the third quarter, compared to 3.2% in the last quarter.
Leo noted that because “demand far exceeds supply, and it’s often the highest bidder who wins,” many landlords have raised their asking prices above market rates.
Consequently, tenants are signing contracts for three years or more “to lock in their desired unit and a better price,” Leo explained.
He also stated that rising interest rates and inflation have worsened the situation. “More and more landlords are passing on their increased mortgage payments and living costs to tenants… This constantly challenges the rental affordability of tenants,” Leo said.
He warned renters not to expect a “quick relief” from soaring rental prices, as the trend of tenants signing longer leases will affect the number of available rental units, thereby increasing market demand. At the same time, attention should be paid to private property owners who buy non-subsidized resale HDB flats, as they may rent during their 15-month wait-out period, further increasing demand.
On September 30, Singapore introduced several property cooling measures, including a 15-month wait-out period for private property owners after selling their homes before they can buy a resale HDB flat.
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Leo pointed out that the return of foreign students and the continued increase in expatriate employees could be another reason for the strong rental demand in the third quarter.
Leo said that as rising rents exceeded tenants’ budgets, some chose to move to cheaper apartments, leading to a “musical chairs” effect. “Some of them moved from the Core Central Region (CCR) to the Rest of Central Region (RCR), while others moved from the RCR to the Outside Central Region (OCR),” he said, causing rent increases in the two regions outside the CCR.
Leo noted that with more homes being completed next year, the pace of rental price increases might start to slow from mid-2023.
Singapore’s Private Housing Supply
In the third quarter, a total of 1,455 uncompleted private residential units (excluding Executive Condominiums, ECs) were launched, down from 1,956 in the previous quarter. A total of 2,187 private homes (excluding ECs) were sold, a slight decrease from 2,397 in the last quarter.
No new EC units were launched in the third quarter, and only 28 units were sold. In the previous quarter, 616 EC units were launched, and 193 were sold.
The URA stated that a total of 3,619 units, including ECs, are expected to be completed in 2022, with another 20,098 units, including ECs, expected to be completed in 2023.
A total of 28,800 units, including ECs, are expected to be completed in 2022 and 2023, which is nearly three times the 10,400 units completed in 2020 and 2021.
“This will help meet housing demand in the short term. As of the third quarter of 2022, a total of about 31,400 units have received planning approval and will be completed after 2023,” said the URA.
Singapore’s Property Market Outlook
Leo suggested that climbing interest rates, geopolitical tensions, and the risk of a global recession may have caused investors to lose confidence in stocks and risky assets, prompting them to turn to real estate investment, “a recognized safe-haven asset or a hedge against inflation.”
“Robust household balance sheets, a tight domestic labor market, and sustained income growth” will also support housing demand, he said. While rising mortgage rates and prices will put pressure on homebuyers, some may still rush to purchase properties before rates climb further.
He also added that private home prices are expected to rise by 9% to 11% this year.
“For investors and landlords, soaring rents provide a buffer against their higher mortgage payments. If mortgage rates continue to surge and increased competition from more new homes next year, some landlords may struggle to cope. The situation could be further exacerbated by rising property taxes and living costs.”
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