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Singapore Homes Prices Falling? Is This The Beginning Of A New Trend?”

Posted by Jayson Ang on December 30, 2023

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TLDR

The Singapore property market has seen a slight dip in private home prices after a significant increase over the past three years. Factors such as project delays, work-from-home trends, low-interest rates until 2022, and global uncertainties have been influencing prices. Rental prices have shown a slower growth rate recently, with easing momentum in various market segments. Government measures like increased stamp duty for foreign buyers and rising interest rates are impacting property prices. The number of unsold units is on the rise, indicating a possible shift in demand. While prices may not surge as before, significant drops are unlikely in 2023. Consider strategic real estate advice and market insights before deciding to buy or sell a property in Singapore.

After what seemed like forever since early 2020, the cost of private homes in Singapore finally took a small dip. This fresh scoop is hot off the press from the July 2023 property statistics dished out by URA.

Thinking of snagging your own pad or leveling up to something snazzier in Singapore? This slight price drop could be just the relief you’ve been waiting for – and boy, it’s about time! The data from URA shows that the price index has soared an impressive 27.8%, climbing from 152.1 (1Q2020) to 194.4 (2Q2023).

So, what’s been pumping up these prices for the past three years? A whole lot of things. There have been delays in projects causing a crunch in available homes, the younger generation keen on getting their own space because of work-from-home gigs, super low-interest rates until 2022, and Singapore appearing like a comfy haven to outsiders amidst worldwide turmoil.

But what’s the current scene? Are these factors losing their punch? And the big question – are we going to see more of these property prices rolling downhill in Singapore?

Cooling Off: Private Home Rental Market Takes a Chill Pill!

When we’re trying to size up the property scene, we often like to peep at the rental market. It’s a pretty solid way to gauge how things are shaping up in the short-term for property demand and supply, especially here in Singapore where folks usually sign a lease for 1-2 years.

Now, people in Singapore aren’t just throwing money on rent for the fun of it. Most renters fall into three categories: 1) they’re not locals and need a place to crash, 2) they’re Singaporeans playing the waiting game – either for their own place to be ready or for the perfect time to buy, and 3) they’re just eager to fly the coop and escape their parents’ house for a bit.

The thing is, all these reasons are pretty temporary and can shift based on what life throws their way. Any changes in these situations can make the rental index do a little dance.

Fast forward to the second quarter of 2023, and the rental index has seen a 2.3% bump. But hey, it’s not all bad news! This increase is actually a lot smaller than the previous quarter’s leap of 6.2%. So sure, it’s still climbing, but it’s more of a gentle hike now rather than a steep uphill battle.

According to URA.

Rental momentum eased across all market segments. Rentals of non-landed properties in CCR saw an increase of 2.0% in 2nd Quarter 2023, compared with the 6.4% increase in the previous quarter. Similarly, rentals in RCR increased by 2.0%, compared with the 6.2% increase in the previous quarter. Rentals in OCR increased by 2.9%, compared with the 6.1% increase in the previous quarter.

Well, there are a bunch of possible reasons for rental prices slowing down. Maybe the costs shot up so high last year that they just had to hit a wall at some point. You know, when folks just can’t stomach shelling out more cash and start scouting for other options. Or maybe some people have finally moved into their own homes and aren’t renting anymore, which takes a bit of heat off the demand.

Anyhow, it’s definitely a good idea to keep an eye on the rental price trends in the next few months. If we see the numbers dipping, that’s a pretty solid hint that demand isn’t as hot as it was, and we might see property prices going down too.

Interest Rates and Cooling Measures Begin to Nudge Pricing

So, get this. On April 26, 2023, the bigwigs in government decided to crank up the Additional Buyer’s Stamp Duty (ABSD) – basically a fancy name for property cooling measures. Guess who got hit the hardest? Yep, folks from abroad buying homes in Singapore. Their ABSD shot up from 30% to a whopping 60% on April 27, 2023! So, if a foreigner decides to buy a property worth a cool million, they’ll have to shell out an extra $600,000 just on ABSD. Crazy, right?

And guess what? Singapore might just be the priciest place on planet Earth for foreigners to buy a house.

Not shockingly, this move has started to shift prices a bit. It’s kinda obvious that more foreigners will now prefer renting over buying. Can’t really blame them, can we? This should help bring down demand and prices.

Meanwhile, the US Federal Reserve has been steadily hiking up interest rates for the past year and a half. And yes, it’s had its ripple effect here too, with the 3-month Singapore Overnight Rate Average (SORA) standing at 3.67% as of August 1, 2023.

All these new rules and the climbing interest rates are making buying a home in Singapore pricier than ever before. So, get ready to cough up more dough if you’re planning to buy a house here!

Number Of Unsold Private Residential & ECs Units Are Finally Increasing

The housing market has a certain rhythm to it, which makes sense when you think about it. When more people want houses, the cost gets bumped up and developers get busy building more homes. As long as there are more buyers than houses, prices can keep climbing.

A good way to gauge this buyer-to-house ratio is by checking out how many unsold private homes are out there. Just because a ton of new homes pop up doesn’t mean prices will drop – not if they’re all getting snapped up quick. But when we start seeing more and more unsold homes, that’s a sign either demand is cooling off, or prices have just gotten too steep.

As of mid-2023, the pipeline’s got nearly 50,000 units, with about 19,000 of them still up for grabs. If you glance at the data above, you’ll notice that these unsold figures have been on the rise since late 2022.

But don’t get carried away just yet! We’re still far from early 2019 levels when there were over 56,000 units in the works, and a whopping 38,710 were left gathering dust. So today’s leftover count isn’t anywhere near what we had back then.

Looking ahead, it’s pretty safe to say that house prices in Singapore aren’t going to rocket up as fast as they did in the last three years. But considering that there’s still a healthy appetite (especially in the rental sector) and not that many unsold homes, we shouldn’t bank on property prices dropping significantly in 2023.

Should You Buy, Sell or Wait?

If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?

It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.

I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.

I can help you by:

Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.

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