Resilient Residential Property Market
In 2022, the prices of homes in Singapore continued to increase, including both private and public housing. However, there were not enough homes available for sale, which reduced the number of transactions. On the other hand, the rental market remained strong, with high demand and limited availability causing rental prices to increase.
Effects of New Cooling Measures in September 2022
Despite strong demand for new homes in 2022, people became more cautious due to rising uncertainties, such as geopolitical tensions and global economic challenges. Many central banks, including the US Federal Reserve, raised interest rates to combat high inflation. This caused borrowing costs and mortgage rates to increase in Singapore. In response, the government introduced new measures in September 2022 to encourage people to be more careful when buying homes. These measures include a longer wait time for people who have sold their private homes before they can buy public housing, as well as changes to interest rates and loan-to-value limits for those taking HDB loans. Developers also showed more caution in government land sales.
Tightening of Monetary Policy
In 2023, there are still risks to the economy, including high inflation, geopolitical tensions, and slowing growth, which could lead to a global recession. However, the Singapore residential property market is expected to remain stable due to strong demand and a healthy market. The Singapore economy is projected to grow between 0.5% to 2.5% in 2023, which is slower than in 2022. Despite this, PropNex, a real estate company, remains optimistic about the residential property market in Singapore for the upcoming year.
Interest rates are expected to remain high in 2023, but they may stop increasing as quickly in the second half of the year if inflation is controlled. This could give people more confidence to buy homes, especially since there will be more than 12,000 new private homes available for sale during the year. The public housing resale market is also expected to remain strong due to high demand from Singaporean households.
Most households in Singapore are in a good financial position, and rules have been put in place to make sure that homeowners don't borrow too much money. However, high inflation and rising living costs may reduce people's disposable income, and the economy may slow down, which could make people more cautious when buying property. Homes that are priced reasonably and located in good areas should still be popular with people who want to live in them or upgrade from public housing.
Attraction of Singapore
Singapore is a popular place for businesses and wealthy people, and it's also considered a safe place to invest. In 2021, there was a record $448 billion of new money invested in Singapore. Investors are likely to continue to be interested in Singapore, and the real estate sector is likely to benefit from this investment. Foreign buyers may be especially interested in buying homes in the city or near the city center.
Despite some challenges in the short term, the Singapore residential property market is still a good investment for the long term. This is because Singapore has a stable political environment, plans for urban renewal, and strategies to attract global talent and businesses. Many people in Singapore are also becoming more affluent, which supports a healthy property market.
Real Estate Trends in 2023
Sustainability. - The Singapore residential property market is seeing a growing focus on sustainability and resource efficiency in buildings. There is a greater emphasis on constructing green homes that are designed to be energy-efficient, use environmentally-friendly materials, and reduce carbon emissions. This trend is driven by the increasing awareness of climate change and the need to reduce our carbon footprint. Homeowners are also becoming more conscious of their impact on the environment and are looking for ways to reduce their energy consumption and utility bills.
Space. - Another trend that has emerged in the Singapore residential property market is a preference for more spacious homes. This is due in part to the rise of hybrid working arrangements, which has made people spend more time at home. Homebuyers are looking for larger homes that offer more space for home offices or study rooms. Multi-generational households are also becoming more common in Singapore, with adult children staying with their parents or grandparents. Foreign buyers, particularly those from countries with larger homes, also prefer larger-format homes. As a result, developers are increasingly offering larger units in new residential projects.
Supply. - The supply of new private homes in Singapore is expected to increase in 2023, with approximately 12,000 new units expected to be launched for sale. Many of these projects are located in the city centre (CCR) and city fringe areas (RCR). Despite the recent cooling measures introduced by the government to curb property speculation, the prices of new launches are expected to remain firm due to high land costs, rising construction costs, and low unsold inventory in the market. This means that developers may not have much room to lower prices significantly, especially for well-located and desirable properties.
Opportunities in 2023
In 2023, there are opportunities in the real estate market such as value buys in the Core Central Region (CCR) and a larger supply of new private homes being launched (approximately 12,000 units including Executive Condominiums) compared to 2022. However, the growth of resale property prices may not be as significant as the new sales market.
Challenges in 2023
On the other hand, there are also challenges in the market. The benchmark pricing of new homes may test the affordability threshold due to the rising interest rates. Additionally, there is a tight supply of new mass market condos and resale properties, which may be further affected by elevated home loan rates and the risk of recession.
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