Singapore’s positive economic outlook and low unemployment rate provide support for the fundamentals of the real estate market, despite downside risks from a potential escalation in global trade tensions.
For potential buyers, it is wise to adopt a cautious approach, especially considering the current high property prices and mortgage interest rates.
The Singapore real estate market has seen renewed confidence in early 2025, despite a previous decrease in transaction volume.
While property prices continue on an upward trend, housing affordability is nearing its peak, which will require corresponding growth in household income to sustain this momentum.
Given the government’s ongoing cooling measures, I expect a moderation in real estate price growth in 2025.
Singapore’s Producer Price Index (PPI) is expected to grow by 1% to 2%, in line with inflation expectations, a significant decrease from 6.8% in 2023 and 3.9% in 2024.
Housing Prices Stabilizing
Singapore’s positive economic outlook and low unemployment rate provide support for the fundamentals of the real estate market, despite downside risks from a potential escalation in global trade tensions.
Buyer sentiment is largely influenced by economic conditions and employment levels.
I forecast that Singapore’s GDP will grow by 2.8% year-on-year in 2025, surpassing the midpoint of the Ministry of Trade and Industry’s (MTI) forecast range of 1% to 3%.
A more favorable interest rate environment, with mortgage rates declining following the US Federal Reserve’s rate cuts between September and December 2024, is likely to support buyer sentiment.
With current rates between 2.5% and 2.6% (down from around 4% a year ago), homebuyers can save nearly S$800 per month on a S$1 million loan.
Despite positive sentiment on the demand side, supply-side factors, such as stable land prices and high construction costs, suggest that new home prices are likely to remain firm.
Over the past two years, the number of developers participating in land tenders has significantly decreased (averaging two to three bidders compared to the historical average of 10), indicating a cautious market.
Given that overall tender prices have remained relatively stable, coupled with persistently high construction costs, we expect limited downside for new launch prices.
For the HDB resale market, I expect prices to be supported by demand from (i) Permanent Residents (PRs) and (ii) former private property owners who have completed their 15-month waiting period.
These buyers, who may have substantial gains from selling their private properties, could provide more impetus for HDB flat price increases in 2025.
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New Households and Upgraders Driving Private Housing Demand
The formation of new households is a key driver of real estate demand in Singapore. According to the Department of Statistics Singapore, an average of 20,000 new households were formed annually over the past five years.
Although the government has increased the supply of HDB flats, a segment of the population may still require private housing or resale public housing due to reasons such as exceeding the income ceiling for Build-To-Order (BTO) flats (S$14,000), location preferences, or purchase timelines.
Using marriage rates as a proxy for future household formation (averaging 27,000 couples per year over the past five years), we expect sustained housing demand.
Although the number of marriages exceeds the number of new household formations—possibly due to young couples living with their parents—the strong aspiration for homeownership among Singaporeans suggests that demand for private housing will remain robust in 2025.
Upgraders are a significant component of the private housing market. They typically fund their down payments by selling their HDB flats and using their accumulated savings.
A significant pool of potential upgraders is expected, with over 100,000 HDB flats reaching their Minimum Occupation Period (MOP) between 2019 and 2023.
Furthermore, as household incomes rise, the increasing number of households with monthly incomes exceeding S$20,000 indicates their ability to afford private housing, supporting sustained demand.
Are Housing Prices Still Affordable?
An analysis of Singapore’s house price-to-income ratio suggests that affordability has reached the upper end of its historical range.
Comparing median house prices to annual household income growth since 2000, while income has generally kept pace with property prices, recent price growth has outpaced income growth.
Between 2000 and 2023, the average price-to-income ratio was 13.4 times.
However, this ratio increased to 14.1 times in 2023 and is approaching 14.6 times in 2024, reaching the upper limit of historical affordability levels.
This implies that to sustain rising property prices, faster income growth, larger down payments, or a shift towards smaller, lower-priced homes will be necessary.
With the implementation of loan restrictions such as the Total Debt Servicing Ratio (TDSR) and rising private property prices, a buyer’s purchasing power is increasingly dependent on their borrowing capacity, which is based on household income.
Therefore, the total property price is now more critical than the price per square foot.
For example, a 1,200 sq ft older three-bedroom condo at S$2,200 per square foot would have a total price of over S$2.6 million.
In contrast, a 900 sq ft new three-bedroom condo at S$2,600 per square foot would have a total price of under S$2.3 million.
This shows that with a fixed borrowing limit, a buyer would need to pay an additional S$300,000 for the older condo, despite its lower price per square foot.
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New Launch Transaction Volume Expected to Rise in 2025
I expect new launch sales volume to increase year-on-year, driven by a strong launch pipeline and attractive buyer interest.
Government Land Sales (GLS) sites in desirable locations such as Orchard Boulevard, Zion Road, Holland Drive, and River Valley Green are expected to attract significant attention, especially if priced competitively.
The expected launch of three Executive Condominiums (ECs) in 2025—Aurelie in Tampines (Q1 2025), Plantation Close in Tengah (Q2 2025), and Jalan Loyang Besar (Q4 2025)—will further boost this growth, as they typically see strong sales due to their lower price points.
Overall, declining interest rates are expected to support strong transaction volumes in the new launch market in 2025.
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Home Loans for Private Properties
The Singapore real estate market is expected to maintain price stability in 2025, supported by sustained demand.
Given the significant financial commitment involved in purchasing a property, potential buyers should adopt a cautious approach, especially considering the current high property prices and interest rate levels.
Careful budgeting and a comprehensive savings strategy are crucial for ensuring long-term financial health and responsible homeownership.
Let’s take an example of a new condominium in the Rest of Central Region (RCR) priced at S$2.4 million. Assuming a 35-year-old Singaporean couple with a monthly income of S$18,000, here are the mortgage details:
Based on a 75% Loan-to-Value ratio, they can borrow up to S$1.8 million. The down payment would be S$560,000, of which at least S$120,000 must be paid in cash. Assuming a household savings rate of 30%, it would take the couple nearly two years to save for the down payment. Based on a 3% annual interest rate, the monthly mortgage payment for a 30-year loan is estimated to be S$7,589.
Therefore, careful planning is crucial, especially in the current environment of high property prices and interest rates.
A clear budget and savings plan will greatly assist homebuyers and ensure a smoother and more successful home financing experience.
Additionally, it is advisable for homebuyers to continuously monitor mortgage rates and consider refinancing and repricing options when appropriate.
For those who are asset-rich but cash-poor, a home is a valuable asset that can be monetized in various ways to bridge funding gaps.
Buying a home is a significant investment, and affordability is key.
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