Why Singapore residential transactions were lacklustre in Q4 2022
Singaporeans likely went on a ‘holidays before home purchase’ mode.
Based on flash estimates by the Urban Redevelopment Authority (URA), prices of non-landed private homes (excluding Executive Condominiums (ECs)) increased by a moderate 0.1% q-o-q, reflecting an annual increase of 8.0% y-o-y for 2022**.
Knight Frank says two years after the pandemic and prices rose by 18.6%**, driven by strong sales of new launches mainly in the suburban and fringe areas that set new price benchmarks.
Here’s more from Knight Frank:
In Q4 2022, many potential homebuyers were observed to have indulged in revenge travel to make up for the enforced cross border restrictions during the COVID-19 years.
As such, a quieter mood prevailed as sale transactions for non-landed private homes dropped significantly by 48.3% q-o-q to 2,884 in Q4 2022*. With the lack of available inventory for sale, perhaps homebuyers embarked on their holidays before deciding on prospective housing purchases.
There were also fewer new units released by developers in Q4 2022 as new sales volume contracted 69.4% q-o-q with 652 units sold. Sales in the secondary market declined 35.1% q-o-q with 2,232 transactions recorded in Q4 2022*.
With a looming global recession coupled with the high interest rate environment, non-landed home transaction activities slowed down as the lack of listings compelled homebuyers to adopt a watch-and-wait posture until more units become available.
Core Central Region (CCR)
Prices of non-landed homes in the CCR rose 0.5% q-o-q in Q4 2022**, with the annual price increase at 4.6%**. Although Singaporeans continued to comprise the largest proportion of non-landed homebuyers in the CCR, the share of foreign homebuyers increased from 8.9% in Q1 2022* to 15.8% in Q4 2022*.
While prices increased moderately, sales in CCR shrank by 33.8% q-o-q with 792 non-landed transactions in Q4 2022*. New sales contracted by 33.0% q-o-q to 374, while resale volume declined by 34.5% q-o-q to 418 in Q4 2022*.
Rest of Central Region (RCR)
Prices of non-landed homes in the RCR also increased 2.6% q-o-q and 9.2% y-o-y in Q4 2022**, due to the new launches such as Piccadilly Grand and Liv @ MB during the course of the year, which achieved robust sales.
Nevertheless, the total transaction volume in the RCR fell in the last quarter as new sales dipped 53.3% q-o-q to 170 transactions with a lack of new projects, and sales in the secondary market fell 37.1% to 663 sales in Q4 2022*.
Outside Central Region (OCR)
The OCR was the top performer for the year, surpassing all other market segments in terms of price growth and sales volume. While the price index in the OCR dropped by 2.6% q-o-q in Q4 2022**, it gained 9.3%** for the year. The price expansion throughout 2022 was fuelled by the strong take-up of new launches in the first three quarters of the year, until interest rates soared and kept many buyers on the sidelines in the last quarter.
New sales in the OCR shrank 91.1% q-o-q to 108 sales in Q4 2022*. In comparison to Q3 2022, the massive dip in new sales was due to the dearth of new launches in the final three months of the year, resulting in all sales to dive 57.5% q-o-q to 1,259 transactions in Q4 2022*. Secondary sales in the OCR decreased 34.2% q-o-q to 1,151 units in Q4 2022*.
Islandwide leasing contracts for non-landed private homes totalled 10,931 in October and November 2022, a significant decrease of 34.5% when compared to July and August 2022, and 24.6% lower than the same period in 2021.
Despite the decrease in rental volume, demand pressures in the leasing market remained high as rents increased between 3% and 9% q-o-q across the different segments. With ongoing geopolitical tensions in various parts of Asia and the world, Singapore offered foreign professionals and executives a stable environment in which to live and work characterised by connectivity to quality schools, retail amenities and modern workplaces. In addition, locals waiting for their new homes to complete also added to the ongoing demand for rental accommodation.
Even though some 17,000 plus new private homes are slated for completion in 2023, the leasing market is unlikely to cool off immediately in 2023 due to the persistent leasing demand in the private residential market. Private home downgraders affected by the latest cooling measures would also put pressure on the leasing market.
The lack of saleable inventory continues to crimp transaction activity with homeowners hesitant to sell their homes without securing a new one to occupy, even though price premiums were offered. However, come 2023, some 34 new projects could possibly launch island-wide consisting of around 12,000 units that will bring some relief to the undersupplied situation and provide homebuyers with more product choices in a buffet spread of locations.
However, the greater volume and variety of new private stock comes at a time of economic uncertainty, employee layoffs in the technology sector, continued rising interest rates as well as the increased cost of consumption.
Therefore in 2023, demand might turn more conservative with 7,000 to 8,000 new sales and an estimated overall private residential transaction volume ranging between 21,000 to 25,000 units. In view of the above, private home prices are projected to grow by a more moderate 5% to 7% for the whole of 2023, against the 8.4%** increase in 2022.
* based on data available as at 30 December 2022. Figures exclude Executive Condominiums (ECs).
** based on flash estimates announced on 3 January 2023.