Signs that Singapore is finally achieving balance in residential supply and demand

Home prices are showing signs of stabilisation, inching up 0.8% in Q3.

According to Knight Frank analysts, the balance of demand and supply is beginning to materialise in the Singapore private residential market. 

Although the URA All Residential Price Index returned to positive territory with a 0.8% q-o-q increase against the decline of 0.2% in Q2 2023, the current price growth is moderate and showing signs of stabilisation.

Here’s more from Knight Frank:

The overall price growth has eased as homebuyers increasingly take more time to decide, and this will likely form the prevailing trend for the rest of the year and into 2024.  

Despite the launch of several prominent projects mainly in the fringe and the suburban areas in Q3 2023, take-up rates were more selective. The diversity of choices led to more time being taken to consider options alongside decision fatigue among buyers, who are no longer showing the type of urgency exhibited a year ago.

Additionally, the broad impact of the latest round of cooling measures announced on 26 April 2023 is showing up more prominently in the official data.

General demand for private homes in the months ahead will remain underpinned mostly by homebuyers purchasing for their own occupation, even as these buyers take a longer time to consider in light of factors such as the latest cooling measures, sticky high interest rates, job security, inflationary and recessionary pressures.

Although household balance sheets are healthy, homebuyers have been and will continue to be circumspect in their housing decisions, targeting locational and product attributes that best fit their lifestyle and family requirements, such
as schools.

Residential investors purchasing for capital preservation, appreciation, and recurring income, both locals and foreigners, will likely remain on the sidelines until interest rates peak and stabilise, and until there is more clarity in the economic outlook.

That said, history has shown that experienced investors familiar with Singapore’s private residential scene are quick to react when windows of subdued activity turn with the return of transactional activity, when the external environment improves.

Another definitive sign of demand and supply achieving balance are the indicators announced for the private home leasing market. The URA rental index for private homes increased by 0.8% q-o-q in Q3 2023, after chalking up increases of 7.2% in Q1 2023 and 2.8% in Q2 2023. In the past nine months of the year, this has culminated in an 11.1% increase. With 15,883 private homes and 1,316 executive condominiums (ECs) making for a total of 17,199 ready new homes between January and September 2023, the leasing market has normalised.

Now in calmer waters, private home rents are expected to plateau in the remainder of the year and into 2024, especially with another 3,167 units expected to be completed in Q4. As rental movement might navigate between minus 1% and plus 1% in the upcoming quarters, cost-conscious foreign homebuyers that are affected by the prohibitive 60% Additional Buyer’s Stamp Duty rate can now look towards the leasing market with more assurance, especially those who have acclimatised to the Singapore lifestyle and wish to pursue permanent residency.