Singapore Housing Market Slows And Rent Falls

Singapore's real estate market is experiencing a slowdown, with home prices rising less than previously estimated and rents declining in the second quarter. The Urban Redevelopment Authority (URA) reported a 0.9% increase in private home values from the previous quarter, falling short of the earlier 1.1% estimate and the 1.4% rise seen in the first quarter. Despite the moderated growth, this marks the fourth consecutive quarter of price increases, even as sales slow.

Private rents, which have been a significant concern for residents and expatriates alike, decreased by 0.8%, following a 1.9% drop in the previous quarter. This marks the third consecutive quarter of rent declines, although rents remain high after a surge of over 50% in the past four years. The housing market's resilience highlights the robust local spending power, despite government efforts to cool the market, including a hefty 60% stamp duty on foreign property purchases.

The continuous rise in home prices poses a challenge for Singapore's ruling party and new Prime Minister Lawrence Wong, as they address voter concerns about housing affordability ahead of an election due by the end of 2025. Bloomberg Intelligence analyst Ken Foong noted that while price growth is moderating, factors such as healthy household balance sheets and families wanting to upgrade their homes could sustain demand. Consequently, Foong has revised his forecast, predicting a 4% rise in home prices this year, up from an earlier "flattish" estimate, with a 1.5% increase expected in the second half.

The market dynamics reveal that second-hand home transactions are significantly contributing to the price growth, while new home sales have slowed. In the first half of the year, developers sold 1,889 units, the lowest number in at least two decades. Despite this, authorities show little inclination to ease cooling measures, as central bank chief Chia Der Jiun indicated there is no immediate need for additional interventions, given the absence of overexposure to real estate within the banking sector.

In a related development, a survey by PropNex Realty revealed that over a third of HDB homeowners feel priced out of the private housing market, believing they will never afford a private home. The survey, which involved 1,250 HDB homeowners, highlighted that 36% of respondents see private home ownership as unattainable, with others estimating it could take 5-10 years or more to afford a private home. Only a small fraction (6%) believe they could upgrade to private housing within the next year.

Despite affordability challenges, nearly half of the respondents still aspire to upgrade to larger HDB flats or private residential properties in the future. However, high home prices and the additional buyer’s stamp duty (ABSD) regime pose significant hurdles for most HDB homeowners. The current ABSD system requires HDB upgraders to pay a 20% ABSD upfront, which many find prohibitive.

The survey also revealed that high private home prices deter nearly two-thirds of respondents from upgrading. The continuous rise in private residential home prices since 2017, with a 51% cumulative increase by the second quarter of 2024, makes new private residential projects appear unaffordable to many. Consequently, a significant number of homeowners prefer to move into larger HDB flats rather than private homes.

The survey findings indicate that most HDB homeowners have set modest housing budgets, with 62% allocating less than $1 million for future housing. This budget constraint makes the private housing market seem out of reach, as the average prices of new non-landed private units in the suburbs are around $1.9 million, and resale units are about $1.5 million. In contrast, HDB resale flats, with average prices for five-room flats at $714,000, four-room flats at $609,000, and executive flats at $861,000, present more affordable options.

​Moreover, more than half of the surveyed homeowners are not open to selling their flats at a discount, with 87% expecting to sell at a premium over market rates. This reluctance to sell at lower prices is tied to the view of HDB flats as both homes and retirement nest eggs. Despite cautious sentiment amid high interest rates and peak home prices, PropNex anticipates healthy demand in the HDB resale market, projecting a 6-7% increase in HDB resale prices this year.