In The News

Record-setting home prices have emerged in the suburbs, with a growing number of new condominium units sold for over $2,000 per sq ft. The public housing market has seen a record 344 million-dollar flat transactions in the year to date, with the priciest unit changing hands for $1.42 million.

As we enter 2023, “stability” may be the word of the year. Buyers will continue to face uncertainties with the current inflationary landscape and rapidly changing interest rates. The spiralling cost of living and multiple cooling measures may further dampen the pace of price growth.

Here are four key factors that may impact property market dynamics in 2023. 

Buyers can look forward to a bumper crop of more than 20,000 private homes and executive condo (EC) units to be completed by the end of 2023. This will be the highest number of homes to obtain Temporary Occupation Permit (TOP) status in seven years. Although many of these units were bought for owner occupation after 2018’s cooling measures crimped investor purchases, some units will still be released for resale or rental.

A tight housing market, especially in the suburbs, has driven the bout of frenzied price and rental hikes over the past year. With half of the new completions centred on the outside of central region (OCR), part of the supply crunch may be eased in the mass market segment.

A few OCR mega projects with more than 1,000 units will be obtaining their TOP, such as Treasure at Tampines, Parc Clematis and The Florence Residences. Other projects such as Piermont Grand, Sengkang Grand Residences and OLA are above 500 units.

An estimated 6,600 units will similarly be completed in the city fringe or rest of central region. Notable projects include Avenue South Residences, Riviere and Daintree Residences.

New housing stock remains tepid for the luxury market with around 2,500 expected completions. Some newly completed developments include Leedon Green, Kopar at Newton, Haus on Handy, Boulevard 88 and Van Holland. With limited supply and buyers typically favouring new TOP projects, most unsold stock may be fully absorbed soon.

There will be more than 11,000 new homes from over 45 projects, excluding ECs. However, developers may stagger their launches and units may spill over to 2024. The new homes will still be on a par with or surpass the 10,496 launched units in 2021 and 10,883 launched units in 2020, since more than 2,000 launched units remain unsold in October and some may be carried forward to 2023. 

There will be at least seven large developments with more than 500 units. Examples include The Continuum in Thiam Siew Avenue (800 units), The Reserve Residences in Jalan Anak Bukit (740 units), Lentor Hill Residences (598 units) and the sites in Dunman Road (1,040 units), the Marina View white site (748 units), Jalan Tembusu (640 units) and Pine Grove Parcel A (520 units).

In the suburbs, HDB upgraders and young couples can consider two new ECs in Bukit Batok West. Alternatively, there are a few attractive suburban projects like The Botany at Dairy Farm, Kassia at Flora Drive, the former Park View Mansions and the former Lakeside Apartments in Yuan Ching Road, and the development at 798 and 800 Upper Bukit Timah Road.

As the Lentor area is fast transforming into a new residential precinct with a major shopping mall and new amenities, buyers can look forward to the launch of Lentor Hill Residences and sites at Lentor Central and Lentor Hills Road Parcel B if they wish to have a stake in this up-and-coming locale.

In the luxury segment, a few high-profile developments include the redevelopment of AXA Tower, the former Maxwell House, the former Peace Centre and Peace Mansion, Newport Residences (former Fuji Xerox Towers) and the Marina View white site.

Some of these developments will add vibrancy and spruce up Districts 1 and 2 with new residences and amenities. The Government may also unveil the master plan and exciting developments for the Greater Southern Waterfront precinct in 2023. New office buildings, housing of various styles and more nature parks may be added to the nearby Keppel, Pasir Panjang and HarbourFront areas.

We do not expect a major property price correction in 2023. Strong employment is sustaining sellers’ pricing power and they may not be inclined to lower prices. However, housing affordability will be of paramount importance to most buyers. As the era of low interest rates may not return any time soon, most buyers will likely be prudent in their home purchases. Therefore, prices of private homes and Housing Board resale flats are forecast to climb at a slower pace of around 5 to 8 per cent in 2023, down from the 9 to 11 per cent in 2022.

The gap between buyer and seller price expectations may cause fewer deals to be closed or deals taking longer to seal. This slowdown may be mitigated by more completed homes ready for resale in 2023. The net impact may see slower demand with possibly 19,000 to 22,500 private homes transacted in 2023, down from 21,000 to 22,500 units in 2022, and below the 33,557 units in 2021. 

Landlords may face some challenges in 2023. The pressure of soaring rents may be met with greater resistance. Rising rents may push some tenants to shift from the private residential market to more affordable HDB flats. Locals who cannot afford the prevailing rent may move back to their family homes or choose co-living spaces.

Further, more homes will be completed and put up for lease. A sizeable number of tenants who had been waiting for the completion of their new homes and were renting in the interim will also start to move into their new units and exit the rental market.

However, the stream of new rental properties may not substantially alleviate rental pressures. The continual inflow of foreign expats will help to fill the vacancy. The overall rental stock will diminish as tenants sign longer leases of at least two years. Landlords may be reluctant to drop rents as they contend with higher maintenance costs, property tax increases, inflation and rising mortgage rates.  

The net effect may see rents peaking and possibly stabilising from the second half of 2023. Although there is little reprieve for tenants, at least rents may not rise as fast as in 2022. We estimate that rental growth may moderate from 26 to 29 per cent in 2022 to 13 to 16 per cent in 2023. Leasing demand may contract from 91,000 to 95,000 units, to 85,000 to 90,000 units over the same period. 

The uncertain macro-economic environment and volatile equities market have reinforced the need for greater investment security. Many investors will diversify their asset allocation mix and include real estate properties for their stable returns.

Price corrections and housing activity have already turned sluggish in many countries. Although there will not be quick fixes to the global headwinds, Singapore’s property market may ride out the economic challenges differently. Properties here remain highly attractive to local and foreign investors as safe-haven assets. We anticipate a healthy level of investment interest in the year ahead.