Clouds clearing in Singapore’s prime residential market
Core Central Region’s stable prices, growing secondary market sales point to improving outlook post-ABSD hike
MACROECONOMIC uncertainties and the tightening of cooling measures cast a pall on the high-end residential property sector in the past year.
Since additional buyer’s stamp duty (ABSD) rates were hiked up in April 2023, non-landed private home sales in the Core Central Region (CCR) have been lukewarm, particularly in the new home sales segment, as some developers held off on launches. The CCR comprises Districts 9, 10, 11, Sentosa and the Downtown Core, and is commonly seen as a proxy for the high-end market.
Based on URA Realis caveat data, developers sold 248 new non-landed private homes in the CCR in the first nine months of 2024 – on track to posting one of the lowest non-landed new sales on record for this segment. The current record low was in 1998 where 354 units in the CCR were transacted, following the Asian financial crisis in 1997.
Given the right market conditions, upcoming pipeline of new launches, and hopefully astute pricing, the skies may clear. To be sure, the punitive ABSD rate of 60 per cent for foreigners purchasing a residential property, and higher ABSD rates for Singaporeans buying their second and subsequent residential property here will continue to weigh on private home sales, especially in the CCR as this segment tends to appeal to foreigners and investors.
Limited new project launches, high interest rates and cautious market sentiment also curtailed buying interest for much of 2024. Still, there are silver linings.
Stable prices help to maintain market confidence
CCR non-landed home prices have held up, while rising at a slower pace. Notwithstanding several rounds of cooling measures in recent years, CCR prices climbed by 3.8 per cent in 2021, 4.8 per cent in 2022, and 1.9 per cent in 2023. In the first nine months of 2024, CCR prices rose by 1.9 per cent, according to the Urban Redevelopment Authority’s property price index. Meanwhile, median prices have touched new highs. Median unit prices (on a per square foot basis) of new and resale CCR non-landed homes have touched new highs at S$3,246 psf and S$2,103 psf respectively in 2024 (till Sep 30), according to caveats lodged.
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The gradual uptrend in prices amid a fall in sales volume underscores the resilience of the market, and may speak to the depth of household liquidity.
CCR price growth lags other regions and price gap narrows
The price growth of non-landed private homes in the CCR has persistently lagged that of the other submarkets – the Rest of Central Region (RCR) and the Outside Central Region (OCR) – in the last few years.
Since the Covid-19 pandemic, non-landed home prices in the CCR grew by a cumulative 15.1 per cent from the first quarter of 2020 to the third quarter of 2024 – substantially underperforming the 42.2 per cent rise in the RCR and the 40.6 per cent increase in the OCR.
The lag has led to a narrowing of the price gap against other regions in recent years, which had presented buying opportunities.
Taking 99-year leasehold non-landed private homes for comparison, the median unit price gap between the CCR and RCR fell to 14.6 per cent in 2023 for new sales (that is, new launches). In resale, the CCR-RCR price gap was 11.2 per cent. In addition, secondary market sales in the CCR are improving. Although new sales in the CCR have been tepid, resale volume has moved along steadily.
In the year-to-Sep 30 period, there were 1,695 non-landed resale transactions, likely to better the 1,880 resale units transacted in the whole of 2023. The limited number of new launches in the CCR could have channelled buyers to the secondary market.
The outlook
The US Federal Reserve delivered a jumbo rate cut of 0.5 percentage-point in September, and signalled further cuts ahead. This follows 11 rate hikes from 2022 to 2023, as the US sought to tame inflation. A lower interest rate environment will boost market confidence, easing debt burden and making borrowing more affordable.
Meanwhile, the improving economic outlook, a tight labour market, and the strong Singapore dollar – which helps to preserve capital – are all factors that could support the residential property market. Singapore is also seen as a safe investment destination owing to its stable political environment, pro-business policies, good infrastructure, and transparent laws.
There are ample buying opportunities in the CCR from projects that have been completed, existing launches, and upcoming projects. Based on figures from PropNex, there were some 930 units available in the CCR as at Oct 8, 2024. They include units at completed projects such as Cape Royale, The Residences at W Sentosa Cove, and Cuscaden Reserve, as well as existing launches like One Bernam, Midtown Bay, Watten House, and Hill House.
Among the 930 units available for sale by developers in the CCR, two-bedroom and three-bedroom types accounted for the bulk of the stock at about 33 per cent and 30 per cent, respectively. In terms of location, District 4 has the highest proportion of available stock at about 37 per cent.
According to PropNex data, starting prices for available units in the CCR are from around S$1.32 million for one-bedders, S$1.66 million for two-bedders, S$2.15 million for three-bedders, S$3.56 million for four-bedroom units, and S$7.25 million for five to six-bedroom unit types.
There are several CCR projects that are yet to be launched, such as the 246-unit Newport Residences, the 683-unit W Residences Singapore – Marina View, the 188-unit Aurea, and projects coming up on government land sale (GLS) sites sold in Orchard Boulevard, River Valley Green and Holland Drive which can collectively offer more than 1,300 units.
Broad base of Singaporean buyers
Following the ABSD rate hike in April 2023, the proportion of foreigners (non-PRs) who purchased non-landed new or resale private homes in the CCR has dwindled to 5.3 per cent in the year-to-Sep 30, 2024. In the whole of 2023, the proportion of sales to foreigners was 10.4 per cent, according to caveats lodged.
In the first nine months of 2024 (9M 2024), Singaporeans and Singapore PRs accounted for 76 per cent and nearly 19 per cent of CCR non-landed private homes sales, respectively. That Singaporeans continue to form the majority of homebuyers in the CCR is reassuring, forming a stable demand base for high-end homes.
Notably, Singaporeans who purchased non-landed new or resale private homes in the CCR have mainly entered the market at below S$3 million. There were 1,007 new and resale caveats lodged in 9M 2024 in that price range, while in full-year 2023 there were 1,680 caveats for such transactions. Meanwhile, there were 361 transactions by Singaporean buyers at prices ranging from S$3 million to S$5 million in 9M 2024, with sales tapering substantially in the higher price bands.
With growing wealth here and in the region, a more positive market outlook in 2025, and the US Fed rate cut cycle kicking into gear, the CCR may have its moment in the sun in time.
Ismail Gafoor is CEO, and Wong Siew Ying is head of research and content at PropNex
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