TLDR
The market outlook for 2024 suggests continued uncertainties affecting housing demand and risk appetite due to geopolitical tensions, macroeconomic headwinds, and high interest rates. Property cooling measures have slowed price growth, with developers relying more on the local market. HDB resale prices are projected to climb at a more measured pace in 2024. Opportunities in the private residential sector include potential opportunistic buys, while challenges include keeping prices affordable and policy risks. In the HDB resale market, challenges include a mismatch in price expectations and competition from Build-to-Order projects. It’s advisable to seek strategic real estate advice and leverage market knowledge for successful transactions.
Much of the uncertainties that raised caution in the market in 2023 are expected to persist into 2024, at least in the first half of the new year. Geopolitical tensions, macroeconomic headwinds, rising costs and high interest rates will continue to influence housing demand and risk appetite. Where interest rates are concerned, there is a likelihood that they may stabilise further, with some observers predicting the US Federal Reserve could start to trim rates from June 2024.
In addition, the Monetary Authority of Singapore has in October 2023 said that the Singapore economy is projected to improve gradually in the second half of 2024, and that Q3 2023 “likely marked the turning point in the slowdown”. Meanwhile, the labour market remains tight and unemployment rate is low which will help to support the housing market.
Going by recent primary market sales activity and bids for government land tenders, it appears that the residential property market remains relatively resilient, and that home buyers and developers are generally still confident about prospects in the housing market. In particular, the robust demand for well-located projects such as The Reserve Residences, Watten House, and J’den – suggests that the market still has ample liquidity to be deployed when highly attractive developments become available.
Collectively, three rounds of property cooling measures from December 2021 have helped to slow the momentum of price growth in both the private and public housing segments. In particular, the doubling of the additional buyer’s stamp duty (ABSD) rates on foreigners for home purchase to 60% from end-April 2023 has blunt foreign investment interest. To this end, developers will have to increasingly rely on the local market (Singaporean and Singapore permanent resident buyers) to drive project sales, especially in the Core Central Region which tends to see more foreign demand.
Over in the public housing segment, the effects of the cooling measures in September 2022 and the ramping up of new flat supply via the HDB’s Build-to-Order (BTO) exercises have moderated price growth in the HDB resale market. The HDB has committed to launch up to 100,000 BTO flats between 2021 and 2025, to meet current demand. In 2023, the housing board has launched 22,780 BTO flats.
One of the key things to look out for in the new year is the introduction of the Standard, Plus, and Prime HDB flat classification framework from the second half of 2024. The new framework will better reflect the locational attributes of BTO projects, with Plus and Prime flats – which will be in more attractive locations – being subjected to subsidy recovery, longer minimum occupation period of 10 years, and tighter conditions for resale and rental.
The HDB resale market continued to power on in 2023, albeit losing some momentum from the prior two years. The HDB resale price index climbed by 1.3% QOQ (178.5 pts) in Q3 2023 and has reached a new peak (Chart 5). Overall HDB resale prices grew by a cumulative 3.8% in the first nine months of 2023, with PropNex projecting the full-year price growth to come in at around 5% in 2023. The price increase came amid a slight moderation transaction volume, as the ramping up of BTO supply could have funnelled some demand from the resale market.
In 2024, PropNex expects HDB resale prices toclimb at a more measured pace of 4% to 5% – inwhat could be the slowest year of price increasesince 2020 where resale prices rose by 5%, and 2021and 2022 where resale values surged by 12.7% and10.4% respectively.
Meanwhile, HDB resale volume could hover at around 26,000 to 27,000 units in 2024 – relatively on par with the sales in recent years. With the significant increase in BTO flat supply, elevated resale prices, and effects of the September 2021 cooling measures, it could be sometime before the market repeat the feat of the robust sales seen in 2021, where more than 31,000 flats were resold.
The number of resale flats resold for at least $1 million came in at 422 units as at 30 November 2023 (see Chart 6) – already 14% higher than the record 369 units transacted in the whole of 2022.
PropNex expects the number of million-dollar HDB flat transactions should remain elevated in 2024, as many buyers perceive these units which are frequently bestowed with desirable and unique attributes to offer bang for the buck, in view of the pricey private homes in the same location.
Apart from rewriting the transaction volume of million-dollar resale flats, the prices of such flats also continued to move up. In June 2023, a large 176-sq m adjoined flat in Moh Guan Terrace in Bukit Merah became the most expensive resale flat ever transacted when it was sold for $1.5 million (see Table 2).
By flat type, 4-room resale flats led average price growth in Q3 2023 – rising by 1.8% over the previous quarter. This was followed by executive flats and 2-room flats (see Table 3). Meanwhile, the average resale price of 3-room flats crossed the $400,000-mark in Q1 2023 and has stayed above that level since.
Based on completion status of HDB projects, PropNex estimates that 13,093 HDB flats (see Chart 7) could potentially exit their respective 5-year minimum occupation period (MOP) in 2024, with Sembawang, Sengkang, Tampines, and Toa Payoh accounting for about 61% of the total. With fewer flats slated to exit the 5-year MOP in 2024, this could impact the resale stock available on the market. However, this could be supplemented by HDB upgraders who are seeking to sell their flats upon receiving keys to their newly completed homes.
From the second half of 2024, new flats will be classified under a new “Standard, Plus, and Prime” framework, with the latter two categories subject- ed to a longer MOP and stricter resale/rental con- ditions. While the new framework will not affect existing flats, it is possible that some prospective buyers could be put off by the tighter restrictions for the Plus and Prime flats in choice locations (such as near town centres and the MRT station), and may decide to purchase resale flats nearby – this could then push up resale prices, depending on the lease balance and condition of the resale units.
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