Housing developers should brace for rougher conditions in 2026

Housing developers should brace for rougher conditions in 2026

Slower economy, more tepid HDB resale market and stiff competition for land await

Leslie Yee
The Business Times

Dec 1, 2025

https://www.businesstimes.com.sg/opi...onditions-2026

Sales is the lifeblood of any business. On that count, 2025 has been great for housing developers and property agents here.

Excluding executive condominiums (ECs), developers sold 2,424 units of new private homes in October, about nine times the total of the month before and 224 per cent higher year on year, based on data by the Urban Redevelopment Authority.

Analysts reckon that new private home sales, excluding ECs, could come in at 11,000 for 2025 – the highest in four years.

New condo launches this year such as Skye at Holland in the Holland Village area, Penrith in the Queenstown vicinity, LyndenWoods at Singapore Science Park, Lentor Central Residences in the Lentor area and Springleaf Residence in the Upper Thomson area recorded sales of over 90 per cent at their launches.

Softer home loan rates have provided a strong tailwind for private home buyers. The three-month compounded Singapore overnight rate average is now substantially lower versus the start of the year.

Lower interest rates boost condo buying demand and reduce financing costs for developers. Strong sales rates and lower borrowing costs in turn drive higher profit margins on condo projects and outperformance of budget numbers.

Amid robust new condo sales, share prices of major listed property groups that are active in housing development here such as City Developments Limited, GuocoLand and UOL Group have risen sharply in the year to date.

However, housing developers should brace themselves for much rougher conditions in 2026 versus this year.

Economic challenges

One, Singapore’s economic growth could decelerate in 2026. Weaker external demand due to higher US trade tariffs may cast a pall on economic growth prospects in the new year.

With a weaker economy, many businesses being disrupted and increasing adoption of artificial intelligence, might 2026 be a rough year in terms of job losses?

Rising job insecurity and cuts could potentially negate the effects of cheap home loans in home buying sentiment.

Any weakening in buying sentiment caused by rising job anxieties may in turn create negative momentum in new home sales as the mood of potential buyers might abruptly shift, from buying for the fear of missing out to adopting a wait-and-see position.

HDB resale market

Two, some fizz may be coming off the resale market for Housing & Development Board (HDB) flats.

HDB resale flat prices grew at a slower 0.4 per cent in Q3 compared with 0.9 per cent in Q2. Price growth moderated for the fourth consecutive quarter and is the lowest quarter-on-quarter growth since Q2 2020.

Meanwhile, the number of HDB resale flats changing hands in Q3 rose 1.7 per cent over the previous quarter but fell 11.3 per cent versus the year-ago period.

HDB’s ramping up of supply of Build-To-Order flats, including in highly attractive locations, may be siphoning some demand away from the resale market.

Should the pace of growth of HDB resale flat prices slow in 2026, buying demand for new condos will be affected as many buyers fund their purchases from selling HDB homes.

Indeed, an HDB homeowner who cannot easily sell his flat for a lofty price may hold back from trading an HDB flat for a condo unit.

Securing housing sites

Three, given market regulations, residential land banking in the Republic by developers is hard. Thus, developers need to constantly replenish their housing development sites.

However, securing sites at reasonable prices will be tough.

With many collective sale sites, vendors – worried over the replacement costs of a home – have bullish price expectations.

With government land sales sites for housing, competition could be stiff as developers who are running low on housing inventory might feel compelled to bid hard for new sites.

Recent state residential land tenders have drawn strong participation from developers and robust top bids. A condo site next to the Newton MRT interchange station drew eight bids and a highest bid of nearly S$1,820 per square foot per plot ratio (psf ppr), while a housing plot at Bedok Rise, next to Tanah Merah MRT station, attracted 10 bids and a top bid at about S$1,330 psf ppr.

Moreover, the government will release land for about 4,500 private homes on the confirmed list of its land sales programme for H1 2026, below the 4,725 units provided in the preceding half year.

Add to all the above, new players could emerge in the housing development market.

Might other Malaysian players emulate Sunway Group in growing residential property development here? Think too of wealthy foreigners who set up family offices in the city-state, possibly venturing into housing development.

Resource constraints

Four, while lower financing costs help boost profits of housing development projects, developers need to manage the risks of higher construction costs and possible manpower shortages in the built environment.

Competition for materials and manpower may intensify given mega building projects are underway, such as the building of Changi Airport Terminal Five and the expansion of integrated resorts Marina Bay Sands and Resorts World Sentosa.

Might housing development projects see construction timelines slip and costs overrun?

Of course, the government has plenty in its tool kit to help boost demand for the private homes market if needed. Lowering additional buyer’s stamp duty rates for non-permanent resident foreigners or locals buying multiple homes can spur demand.

Still, relaxing of policy measures to boost demand may be premature given the resilience in prices.

Indeed, the risks could be rising of tighter borrowing limits for home purchases to rein in excessive borrowing amid low interest rates.

While 2025 has turned out to be better than expected for housing developers here, savvy players would probably not be popping champagne and instead be carefully squirrelling any unexpected profits to prepare for a possibly much tougher 2026.

The share prices of many developers still trade well below net asset value despite impressive share price rallies this year.

Strength in new condo sales has helped drive share price rises of property groups. These groups now need to work on concrete value-unlocking moves for the next share price catalyst while hoping conditions do not get too rough in the local residential development market.