Will the late-year surge fade away as Singapore's private home market ends 2024 on a

Will the late-year surge fade away as Singapore's private home market ends 2024 on a high note?

Although sentiment appears to be improving, analysts warn that this trend might not last into the new year.

November 26, 2024

CONDOsingapore.com

In a year when new home sales had previously fallen to all-time lows and buyers had remained on the sidelines due to market-cooling measures, Singapore's private residential market appeared to come back to life in the fourth quarter.

Due to developers' reluctance to take on risky projects, three sites were not awarded and one tender closed without any bids, making it an unprecedented year for state land sales.

Although analysts do not believe that the recent surge will continue and prices are not anticipated to rise significantly next year, sentiment seems to be improving after new home sales surged in November.

However, market observers believed that developers should increase land acquisition, albeit with cautious bidding, due to the list of strategically located, "buzzy" housing sites that will be put up for tender in the government land sales (GLS) programme next year.

When City Developments Ltd.'s Norwood Grand was introduced in October, the market for new private homes was rekindled. During the launch weekend, the medium-sized Woodlands project sold 84% of its 348 units.

According to Alan Cheong, executive director of research and consulting at Savills Singapore, this sparked speculation among market observers that later launches, like Chuan Park by Kingsford Group and Emerald of Katong by Sim Lian Group, would be successful.

But when these were finally introduced, their numbers shocked even the most optimistic; agents and developers were both pleasantly surprised, and outsiders were taken aback, leading some to believe that more cooling measures are on the horizon.

During its mid-November launch weekend, the 846-unit Emerald of Katong saw a nearly 99 percent take-up rate at an average price of S$2,621 per square foot (psf). During the launch weekend, about 76% of Chuan Park's 916 units were sold for S$2,579 per square foot that same month.

Developers collectively sold 3,295 private apartments and condominiums in October and November, which is more than the 3,049 units sold in the nine months prior.

According to Wong Xian Yang, research head for Singapore and South-east Asia at Cushman & Wakefield, the last quarter of 2024 is now on track to record one of the highest quarterly sales volumes in more than ten years.

Ismail Gafoor, the CEO of PropNex, pointed out that this is a far cry from the first half of this year, when only 1,889 new homes were sold, the lowest half-yearly total since 1996.

In 2024, buyers and developers were cautious and few large projects were advertised. "Despite being prepared to enter the market, some buyers chose to wait for a better opportunity, which arrived in the latter part of the year due to the US rate cuts, the improving economic outlook, and the influx of new products in November."

Lee Sze Teck, senior director of data analytics at Huttons Asia, estimates that, excluding two executive condominiums (ECs), there will be 22 new launches in 2024, or about 6,800 new units this year.

According to Lee, those numbers are marginally less than the 7,551 homes that were launched in 2023 across 26 projects (not including one EC).

According to Gafoor of PropNex, the unsold inventory of new homes "remains manageable" at 19,940 units (excluding ECs) as of the third quarter's end. "The 19,940 units can be cleared in just over three years if we assume a conservative yearly sales of 6,000 units. We don't think the forthcoming supply will be too much.

According to Tricia Song, CBRE's research head for Singapore and South-east Asia, prices in the EC market increased significantly over the past year, reaching a high of more than S$1,600 per square foot. Prices and sales have increased as a result of rising demand and limited supply.

According to her, the median cost of a new EC has increased by over 40% from S$1.07 million in 2020 to S$1.51 million today. "This is while still being subject to a 30 percent mortgage servicing ratio and a household income ceiling of S$16,000." With the limited amount of loans available to them, ECs are becoming increasingly unaffordable, particularly for first-timers.

Notably, in the first half of 2025, the government will provide three new EC sites that will produce 980 units. By contrast, only one EC site—which produced about 560 homes—was on the H2 2024 confirmed list.

According to Wong of Cushman, the secondary market, which includes subsales and resales, is showing stable volumes and is expected to grow annually in 2024, while the underlying demand in the larger market seems to be stable.

The secondary market saw 11,468 transactions during the first three quarters of this year, which accounts for about 91% of the total volume in 2023.

An extraordinary year

Developers went into risk-off mode, submitting lower-than-expected bids for land or pulling out altogether as homebuyers remained hesitant for the majority of 2024.

As a result, three locations at Media Circle, Jurong Lake District, and Marina Gardens Crescent were unheard of. Authorities rejected bids for these sites because they were "too low," while no bids were received for another piece of land along Upper Thomson Road.

Song of CBRE stated that, with the exception of EC sites, participation in state tenders was low due to measured bidding. She mentioned "plum sites" on Orchard Boulevard, Zion Road, and Holland Drive that brought in lower-than-expected bid prices.

According to her, developers acted cautiously because of higher construction and financing costs as well as uncertain buying demand, especially in the city centre because of the 60% Additional Buyer's Stamp Duty rate for foreigners.

The cost of constructing a "good-quality condominium" increased by about 30% to S$377 psf in the first half of this year from S$288 psf of gross floor area in the first half of 2021, according to Nicholas Mak, chief research officer at Mogul.sg.

According to him, the cost of building luxury condominiums increased by 30% as well, from S$386 psf to S$499 psf during the same time frame.

Risky locations, like the two plots set aside for an unproven new "long-stay" serviced apartment category called SA2 in Media Circle and Upper Thomson, were avoided by developers.

Marcus Chu, CEO of ERA Singapore, stated that the increased number of GLS sites diluted bids overall. "We've also seen the government align the tender closing dates of some well-known sites on multiple occasions, which has further diluted developer bids for these sites."

What lies ahead?

The recent buying frenzy sparked conjecture about additional market-cooling policies in the upcoming year.

Meanwhile, more million-dollar HDB (Housing and Development Board) apartments have been sold than ever before.

According to Gafoor, 940 HDB resale transactions totalling more than $1 million occurred between January and November. The 470 transactions that were recorded in 2023 as a whole are doubled by this.

He added that there would be little impact on the private housing market because the 940 transactions in the year ending in November only made up 3.7% of all HDB resale transactions.

While overall private home prices fell by 0.7% in Q3, HDB resale prices increased by 2.7%. In the first three quarters of this year, the HDB resale price index increased 6.9% cumulatively, which was significantly higher than the 1.6% gain in the private home market as a whole.

However, the majority think that cooling measures are unlikely in 2025, particularly given the upcoming general election.

According to CBRE's Song, total new home sales (excluding ECs) are anticipated to be between 6,500 and 7,000, which is significantly less than the yearly average of 9,288 units from 2019 to 2023 and comparable to 2022's 7,099 units and 2023's 6,421 units.

According to stress tests conducted by the Monetary Authority of Singapore, most households can still pay off their debts even if interest rates increase to 5.5% and incomes decline by 10%, according to Lee of Huttons Asia.

Chu of ERA noted that price growth has already slowed this year, reaching just 1.6% in the first nine months.

Expectations for the upcoming year are mixed.

Similar to the 2–3% growth predicted for 2024, Wong projects that overall private home prices will increase by 3–4% annually in 2025.

He added that current cooling measures and loan kerbs continue to limit wider buyer affordability. A decline in the employment outlook or disruptive dynamics from the global economy are the main risks.

Mak of Mogul.sg brought up the US, where Donald Trump, the president-elect, had "promised to raise more trade barriers for friends and foes alike."

"For an open economy like Singapore, this could create economic headwinds, which would negatively affect the demand for private housing," he continued.

However, according to Savills' Cheong, "a large amount of savings from baby boomers, new citizens, (permanent residents), and early cohorts of Generation X can be vicariously redeployed into private housing through their children's names."

According to him, Singapore's economy has a sizable pool of baby boomers who profited monetarily from the country's double-digit economic growth in previous decades, in addition to a large number of affluent and skilled people drawn to its shores.

"For decades, the URA private property price index has lagged behind the indexed trajectory of liquid assets per household."

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