Singapore's private home market concludes 2024 on a high note; will the late-year surge dissipate?

Analysts believe that sentiment appears to be improving; however, they caution that this momentum may not persist into the new year.

November 26, 2024

CONDOsingapore.com

In a year in which new home sales had previously plummeted to record lows and purchasers were relegated to the margins due to market-cooling measures, Singapore's private residential market appeared to reemerge in the fourth quarter.

Additionally, the year was characterised by an unprecedented level of state land sales, as developers refrained from undertaking hazardous projects, resulting in the nonawarding of three sites and the closure of one tender without any offers.

Analysts are sceptical that the recent surge will be sustained, and prices are not anticipated to increase significantly in the coming year, despite the fact that sentiment appears to be improving following a significant increase in new home sales in November.

However, market observers believe that the government's upcoming land sales (GLS) programme, which will feature a selection of well-located, "buzzy" housing sites, will prompt developers to increase their land acquisition efforts, albeit with cautious tendering.



The introduction of Norwood Grand by City Developments Ltd. in October reignited the demand for new private residences. The inaugural weekend of the medium-sized project in Woodlands resulted in the sale of 84% of its 348 units.

Alan Cheong, executive director of research and consultancy at Savills Singapore, stated that this sparked speculation among market observers that subsequent launches, including Chuan Park by Kingsford Group and Emerald of Katong by Sim Lian Group, would be successful.

"However, the numbers of these were so surprising that even the most optimistic individuals were taken aback when they were finally released. Both agents and developers were pleased with the results, while outsiders were taken aback, leading to some speculating that additional cooling measures may be implemented."

During its inaugural weekend in mid-November, the Emerald of Katong, which contains 846 units, achieved a take-up rate of nearly 99 percent at an average price of S$2,621 per square foot (psf). Additionally, approximately 76% of Chuan Park's 916 units were sold during the inauguration weekend at a price of S$2,579 per square foot that same month.

In October and November, developers collectively sold a total of 3,295 condominiums and private apartments, surpassing the previous nine months' sales of 3,049 units.

According to Wong Xian Yang, the research director for Singapore and South-east Asia at Cushman & Wakefield, the final quarter of 2024 is on the brink of achieving one of the highest quarterly sales volumes in more than a decade.

Ismail Gafoor, the chief executive of PropNex, observed that this is a stark contrast to the first half of the year, which saw a tepid pace of new home sales, with only 1,889 homes sold – the lowest recorded half-yearly figure since 1996.

In 2024, there were few significant ventures that were marketed, as purchasers and developers exercised caution. "There were buyers who were prepared to enter the market, but they opted to wait for a more opportune time. This time came in the latter part of the year, with the US rate cuts, an improving economic outlook, and a deluge of new launches in November."

According to Lee Sze Teck, the senior director of data analytics at Huttons Asia, the total number of new launches in 2024 is 22 (excluding two executive condominiums (ECs), which equates to approximately 6,800 units, this year.

Lee reported that these figures are marginally lower than the 26, which, with the exception of one EC, comprise 7,551 properties and were initiated in 2023.



Gafoor from PropNex stated that the unsold stock of new residences, which was 19,940 units (excluding ECs) at the conclusion of the third quarter, "remains manageable." "The 19,940 units can be cleared in just over three years if we assume a conservative annual sales figure of 6,000 units." We do not perceive the forthcoming supply as excessive.

In the past year, prices in the EC market have increased considerably, according to Tricia Song, CBRE's research director for Singapore and South-east Asia. The highest price recorded was over S$1,600 per square foot. Sales and prices have increased as a result of the increasing demand and the limited supply.

The median price of a new EC has increased by over 40% from S$1.07 million in 2020 to S$1.51 million, she stated. "This is achieved while still being subject to a household income ceiling of S$16,000 and a mortgage servicing ratio of 30%." ECs are becoming increasingly prohibitive, particularly for first-time applicants, due to the restricted loan size.

It is important to note that the government will provide three new EC sites in the first half of 2025, which will result in the production of 980 units. In contrast, the H2 2024 confirmed list contained only one EC site, which resulted in approximately 560 residences.

According to Cushman's Wong, the secondary market (which includes resales and subsales) is exhibiting stable volumes and is expected to experience year-over-year growth in 2024, indicating that the fundamental demand in the broader market is consistent.

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

A year that is unparalleled

Developers transitioned to risk-off mode in 2024, submitting lower-than-anticipated land proposals or withdrawing altogether, as purchasers remained uncertain for an extended period.

The outcome was the unprecedented non-awarding of three sites at Marina Gardens Crescent, Jurong Lake District, and Media Circle. The authorities rejected proposals for these sites due to their "substantially low" value, while an additional land parcel along Upper Thomson Road did not receive any bids.

CBRE's Song stated that the participation in state tenders was limited, with regulated tendering, with the exception of EC sites. She referred to "plum sites" on Orchard Boulevard, Zion Road, and Holland Drive, which resulted in bid prices that were below expectations.

She also stated that developers were advised to exercise caution due to the uncertain purchasing demand, which was exacerbated by the 60% Additional Buyer's Stamp Duty rate for foreigners in the city centre, as well as the increased construction and financing costs.

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

He also noted that the cost of construction for luxury condominiums increased by 30% to S$499 psf from S$386 psf during the same period.

Developers withdrew from hazardous sites, including the two plots designated for an untested new "long-stay" serviced apartment category known as SA2 in Media Circle and Upper Thomson.

Marcus Chu, CEO of ERA Singapore, stated that the increased supply of GLS sites resulted in a reduction in proposals on a global scale. "We have also observed the government aligning the tender closing dates of certain popular sites on numerous occasions, which has further diluted the bids from developers for these sites."

What lies ahead?

The recent surge in purchasing activity has sparked speculation regarding the implementation of additional market-cooling measures in the upcoming year.

Simultaneously, the number of million-dollar HDB flats sold has exceeded all previous records.

Gafoor observed that 940 resale HDB transactions exceeded the million-dollar threshold between January and November. The 470 transactions that were recorded in the entirety of 2023 are now doubled.

He also stated that the private housing market would experience minimal impact, as the 940 transactions in the year to November accounted for only 3.7% of the total HDB resale transactions.

In Q3, HDB resale prices increased by 2.7%, while the aggregate price of private homes decreased by 0.7%. The HDB resale price index experienced a cumulative increase of 6.9% in the first three quarters of this year, which was significantly greater than the 1.6% increase in the overall private property market.

However, the majority of individuals believe that chilling measures are unlikely to be implemented in 2025, particularly in light of the impending general election.

CBRE's Song anticipates that the total number of new home sales (excluding ECs) will fall within the range of 6,500 to 7,000 units. This figure is relatively comparable to the 7,099 units sold in 2022 and the 6,421 units sold in 2023, but it is significantly lower than the annual average of 9,288 units from 2019 to 2023.

Lee from Huttons Asia observed that stress tests conducted by the Monetary Authority of Singapore also demonstrated that the majority of households could repay their debts in the event of a 10-percent decrease in income and an increase in interest rates to 5.5 percent.

Chu of ERA has noted that price growth has already moderated this year, with a mere 1.6% increase in the first nine months of the year.

Mixed expectations for the forthcoming year

Wong anticipates that the average price of private homes will increase by 3 to 4 percent annually in 2025, which is consistent with the 2 to 3 percent projection for 2024.

He indicated that the current cooling measures and loan kerbs continue to restrict the affordability of a wider range of buyers. Disruptive dynamics from global economics or a decline in the employment prognosis are among the primary hazards.

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

"This could result in economic headwinds for an open economy like Singapore, which would have a negative impact on the demand for private housing," he continued.

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

He also noted that Singapore's economy is home to a substantial number of affluent and talented individuals who were attracted to its shores by the double-digit economic growth of the previous decades.

"For decades, the URA private property price index has been outperformed by the indexed trajectory of liquid assets per household."