by OrangeTee & Tie Pte Ltd.

Singapore's private home prices up by 3.8% in third quarter

SRX Private Residential Data

Singapore, 28 Oct 2022

SINGAPORE: Private home prices rose at a slower pace of 3.8 per cent in the third quarter of this year after a strong second quarter. 

It was largely driven by the prices of non-landed homes across Singapore, which went up 4.4 per cent this quarter.

The private residential property price index increased to 187.8, up from 180.9 in the second quarter, according to real estate statistics released by the Urban Redevelopment Authority (URA) on Friday (Oct 28).

"By market segment, prices rose the most in the suburbs or outside the central region, which increased by 7.5 per cent. This is the steepest quarterly increase since the third quarter of 2009" when that figure was 16.1 per cent, said OrangeTee & Tie’s senior vice president of research and analytics Christine Sun.

Ms Sun said not as many people bought private property this quarter due to "rising interest rates and higher prices", pointing to URA data that showed a 9.7 per cent decline in sales volume between the second and third quarters of this year.

In the first nine months of this year, rents have risen by 20.8 per cent, Ms Sun said. "Tenant budgets are stretched to new limits" as rents grew at the fastest quarterly pace since the third quarter of 2007, she added.

Ms Sun noted that with "demand far outstripping supply and units readily snapped up by the highest bidder", many landlords have increased their asking prices above market value.

As a result, tenants are signing longer leases of up to three years "to secure units and lock in better rates", Ms Sun explained. 

She also said that rising interest rates and inflation are making the situation worse. "More landlords pass on their increased mortgage repayments and living costs to tenants ... putting a squeeze on tenants' rental affordability," Ms Sun said. 

She warned renters not to expect a "quick respite" from surging rent prices, as the trend of tenants signing longer leases will impact the number of homes available for rental, which may bump up demand. 

What will also intensify demand are private homeowners who buy unsubsidised HDB resale flats, who will be affected by a 15-month wait-out period. They are likely to rent in the interim, driving demand, Ms Sun said.

With more homes slated for completion next year, the pace of rental price growth could slow from mid-2023, Ms Sun noted.

Ms Sun said climbing interest rates, geopolitical tensions and global recessionary risks may be why investors are losing confidence in equities and riskier assets, choosing instead to invest in real estate, "widely regarded as a safe-haven asset or a hedge against inflation". 

"Strong household balance sheets, tight domestic labour market and sustained income growth" will also prop up housing demand, she said, adding that while rising mortgage rates and prices are squeezing buyers, some will still snap up property before interest rates rise further. 

She said private home prices are projected to rise between 9 per cent and 11 per cent this year. 

"For investors and landlords, surging rents are still cushioning the impact of higher mortgage payments now. If mortgage rates continue to soar and competition stiffens (with more new homes on the market next year), some landlords may face difficulty coping with," Ms Sun warned. 

"The situation may worsen when property tax and cost of living increase further."

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