Singapore Property Market 2022: Will Prices Keep Rising or Fall?

Singapore’s real estate market is set to close out 2021 with its best sales performance in recent years, with prices of private residential properties rising for six consecutive quarters and reaching an all-time high in the third quarter of this year.

Prices for city-fringe condominiums in the Rest of Central Region (RCR) and landed properties peaked last quarter, while suburban condominium prices in the Outside Central Region (OCR) set a new high in the second quarter.

More than 25,000 private residential units (excluding Executive Condominiums, or ECs) were sold in the first nine months of this year, surpassing the annual sales records of the past three years.

Singapore Private Home Price Index

Singapore’s private home prices have risen for 15 consecutive months, with a month-on-month increase of 0.7% in October.

Compared to the same period in 2020, overall resale prices increased by 9%. Resale prices for high-end, mid-tier, and mass-market private homes rose by 8.6%, 8.3%, and 9.4% respectively.

Singapore Rental Price Index

Due to limited rental supply in the market, overall private residential rents in Singapore rose by 1.3% month-on-month in October, marking the largest increase in the past five months.

The number of private homes leased also increased by 10.1% month-on-month as borders reopened.

Compared to the same period in 2020, overall private residential rents increased by 9.1%.

The rental increase for mass-market private homes was the most significant, at 9.9%.

Mid-tier and high-end private homes saw increases of 8.7% and 8.4% respectively.

Why Did Singapore Property Prices Rise in 2021?

There are seven main reasons for the rise in Singapore’s property prices in 2021:

1. Widespread Rumors of a New Round of Government Cooling Measures

Although Singapore’s economy contracted by about 5.8% for the full year of 2020 due to the pandemic, the private residential market bucked the trend, with prices still rising by 2.2% for the year.

In January of this year, two cabinet members stated that the government was closely monitoring the local property market to ensure its performance does not outpace economic fundamentals.

These remarks led some buyers to believe the government was hinting at potential upcoming cooling measures, prompting them to enter the market before a new round could be implemented.

2. Singapore’s Low Loan Interest Rates

Singapore’s domestic interest rates are largely influenced by global market trends, especially those of the United States.

The zero-interest-rate policy introduced by the U.S. Federal Reserve (FED) to stimulate the economy has resulted in Singapore’s current low loan interest rates, which average around 1% to 1.8%.

This is highly beneficial for homebuyers, as it allows for low-cost financing, enabling them to leverage bank loans to purchase homes while keeping their mortgage payments affordable.

3. HDB Upgraders Seeking Replacement Homes

Many HDB upgraders, having just sold their flats, are seeking replacement housing, which has driven up the demand for private properties.

The strong demand and rising prices for HDB flats, coupled with repeated delays in Build-To-Order (BTO) projects, have also contributed to strong demand in the private condominium resale market.

4. Rising Land and Construction Costs

The pandemic has led to increased costs for raw construction materials and labor, causing delays and even halts in new property developments, thereby reducing market supply.

Developers’ land banks are gradually depleting, and the inventory of unsold units has fallen to a three-year low. Furthermore, the limited selection of sites under the Government Land Sales (GLS) programme in the first half of this year means that land demand will outstrip supply.

Strong demand for private homes, combined with depleting land banks, has also led to a resurgence of en-bloc sales this year, which could also push property prices higher.

Both land and construction costs in Singapore are steadily rising, meaning that future new developments will only be more expensive.

5. Singapore’s Economic Recovery

Singapore’s economic growth is expected to reach 7.1% this year, the highest among the six ASEAN nations.

As Singapore’s economy recovers from the pandemic, more homebuyers will gain confidence and decide to enter the market.

6. Hedging Against High Inflation

Since the outbreak of the COVID-19 pandemic, supply chain disruptions, soaring energy prices, and increased business costs have led to price hikes for many everyday products and transportation.

A statement from the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) showed that Singapore’s consumer prices have risen for 10 consecutive months, with the overall Consumer Price Index increasing by 3.2% year-on-year in October.

Real estate has always been regarded as a high-quality asset for hedging against inflation and is highly valued for this reason.

Currency depreciation and rising raw material costs have prompted investors to move their assets into safe havens.

7. Limited Spending Avenues Due to the COVID-19 Pandemic

Since the pandemic began two years ago, staying home and working from home have become the norm, with people reducing dining out, commuting to the office, and other social and recreational activities.

Expenses for dining out, commuting, and social entertainment have been saved.

Singaporeans, who love to travel, have been unable to go abroad, thus saving on travel expenses.

The down payment that would have taken several years to save was suddenly available, and some homebuyers’ plans to purchase a property were brought forward.

Will Singapore Property Prices Continue to Rise or Fall in 2022?

With the ongoing recovery of Singapore’s economy and the return of overseas buyers to the property market, the private residential market is expected to remain active for the rest of the year.

Despite the new cooling measures introduced by the government on December 16, Anjia SG predicts that Singapore property prices will maintain stable growth in 2022.

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