In 2022, property prices continued to climb, defying downward economic pressures, even as sales volumes for all property types declined. The rental market also took off, with both HDB and private residential rental prices hitting record highs.
This was partly due to a tight supply. Although pandemic-induced construction challenges have gradually eased and more new projects were launched in 2022 than in 2021, restoring the supply pipeline remains a slow process. Significant interest is expected for the upcoming major new projects.
Demand slowed in the fourth quarter of 2022 due to increased borrowing costs from rising interest rates and the property cooling measures introduced in April 2022. However, asking prices did not decrease. Consequently, we expect a continuation of the same purchasing behavior in the first quarter of 2023.
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Expert Analysis: Key Findings of the Singapore Real Estate Market Report for Q1 2023
Singapore Real Estate Sales Market Index for Q1 2023
In the fourth quarter of 2022, Singapore’s real estate price index fell by 0.8% quarter-on-quarter, due to a decrease in property inquiries.
A significant factor was “revenge travel”—2022 was the year when COVID-19 travel restrictions were significantly eased, and both property agents and buyers took advantage of the December holidays to travel abroad.
Despite the slowdown in quarterly price growth, it is noteworthy that annual prices saw a steady year-on-year increase, supported by low supply and strong employment rates. Influenced by lower supply, the sales price index did not decline, while the sales supply index fell by 20.3% year-on-year.
Since the fourth quarter of 2018, we have observed that the asking prices for resale HDB flats in Singapore have risen for 17 consecutive quarters, although the pace of growth has slowed. This is partly due to the latest cooling measures implemented.
Landed property listing prices have risen for 12 consecutive quarters, while non-landed property prices have risen for 11 consecutive quarters. However, signs of a widening gap in price expectations between potential buyers and sellers have emerged. Unless there is an external shock or economic recession, the situation of high asking prices and low sales demand is expected to persist through the first half of this year.
Top-Performing Districts and Projects
Major new projects in the first quarter of 2023 are expected to perform well. Some of the new launches in Q1 2023 include:
- The Botany at Dairy Farm (District 23)
- Terra Hill (District 5)
- Lentor Hills Residences (District 26)
- The Hill @ One North (District 5)
- Blossoms by the Park (District 5)
- Hill House (District 9)
- Tembusu Grand (District 15)
- The Arden (District 23)
The top-performing districts for non-landed private homes are mostly located in the Rest of Central Region (RCR). Their popularity can be attributed to their accessibility and proximity to the Central Business District (CBD).
On the other hand, the landed property market saw a decline in transaction volume in the fourth quarter, with the average resale rate for landed homes increasing by 5.5%.
The number of million-dollar HDB flat transactions increased from 259 in 2021 to 370 in 2022. In the fourth quarter of 2022 alone, 93 such transactions were completed. The preference for larger HDB flats in mature estates persists, and buyers are likely willing to pay a premium for such homes.
With this in mind, the impact of the latest round of cooling measures and higher interest rates is expected to become more prominent by the end of the first quarter of 2023.
Singapore Real Estate Rental Market Index for Q1 2023
The Singapore real estate rental price index rose by 7.4%, as the median asking rents for both HDB and private residential markets reached five-year highs. With more projects being completed, the rental demand index fell by 28.1%, while the rental supply index increased by 5.6% quarter-on-quarter.
As more projects are completed throughout 2023, the rental supply index is expected to rise further. In turn, demand and rents should stabilize.
Private property owners who are moving to HDB flats may occupy these units while renovating their new homes, thereby pushing up demand. In contrast, the pressure on families waiting for their homes to be completed may ease as construction difficulties subside, whether they are waiting for BTO flats or new condominiums.
Demand from expatriate employees may slow as companies potentially slow down their expansion plans. As more foreign talent either leaves or seeks more affordable housing, rental prices may face downward pressure.
Top-Performing Districts for Private Property Rental Yields
Private properties in the Outside Central Region (OCR) have higher rental yields because property prices in these areas are generally more affordable. Young professionals who prefer to live near their workplaces in the CBD and are willing to pay a premium for this convenience allow properties in the Core Central Region (CCR) to command higher rental yields.
Top-Performing Towns for HDB Rental Yields
Mature estates tend to have higher rental yields than new estates because they offer more amenities and unique characteristics. These estates also tend to be closer to the CBD, making them more sought-after as they provide residents with convenient access to the city.
Conclusion
Overall, the first quarter of 2023 started slowly but on a hopeful note.
Despite geopolitical and macroeconomic uncertainties, rising inflation, and increasing interest rates, the property market remains resilient. Although the cost of homeownership has increased, many buyers remain positive about the long-term prospects of the market.
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