A late-year surge holds private home prices up - will it last?

The numbers are in, and show that a late-year spurt pulled private home prices up by 2.7 per cent for the fourth quarter after three quarters of slow to no price gains. The Urban Redevelopment Authority’s flash data indicates that private residential prices rose 6.7 per cent in 2023, slower than the 8.7 per cent increase in 2022. Prices are still up 32 per cent since bottoming in Q1 2020.  

Sales at two new launches in particular pushed prices upwards in a low-volume quarter. CapitaLand’s J’Den project and UOL and SingLand’s Watten House both came to market at benchmark prices. Prices also rose among landed properties in Q4, reversing their decline in the previous quarter.

The combined impact of several rounds of cooling measures, continued signalling of higher supply to come, and macroeconomic comedowns have no doubt chilled the climate. During the year, home prices fell in some sectors. But players point to pockets of sturdy demand (“resilient” was perhaps the term most-used last year) and see prices holding.  

In the HDB resale market, which to some extent feeds the private residential market with upgrader demand, prices flattened further. The public housing resale price index rose 1 per cent in Q4 over the third quarter, when it showed a 1.3 per cent increase. For the year, resale flat prices are up by 4.8 per cent, less than half of the 10.4 per cent increase in 2022. Volume held steady, with the full-year resale tally just 3.8 per cent less - about 1,200 units - than the year before. The numbers were in line with expectations, with analysts earlier predicting 3 per cent to 5 per cent price growth for 2024.

Aside from the battery of higher costs that households have to buffer for this year - in GST, property taxes, consumer prices and mortgage rates - there is one other big-ticket item that still looms large: a car. 

Do high car COE prices crimp budgets for home buying? Prices of Certificates of Entitlement (COEs) recently fell back after a streak of escalating to alarming levels, but still add over S$100,000 to the price of a new car. Leslie Yee argues that, in fact, high COE prices may give housing demand a boost. For one, the cost of a new car may well put people off buying a vehicle, which then allows them to allocate more income towards the purchase of a home. Secondly, stumping up the Additional Buyer’s Stamp Duty (ABSD) on an investment property may be more palatable to some than paying for a car COE. Leslie spells out why (clue: depreciation) in The Level Ground. 

The big picture shows an improving economy. Fourth quarter GDP growth came in at 2.8 per cent, faster than Q3’s revised 1 per cent. Gross domestic product expanded 1.2 per cent in 2023, boosted by stronger growth in Q4. GDP growth for the year is slightly better than the official forecast of “around 1 per cent”, but still much lower than the 3.6 per cent growth in 2022. 

In his New Year’s Day message on Sunday evening, Prime Minister Lee Hsien Loong warned that the external environment would remain challenging for several years.

Faced with cautious business sentiment and substantial supply, Singapore office market players see another year of modest growth for Central Business District (CBD) Grade A office rents. Market power may shift from landlords, with vacancy and rents possibly coming under pressure, and financing costs still weighing on leasing demand. While sentiment is soft, there is demand waiting which could move in during the second half of the year, consultants tell Kalpana Rashiwala. 

Meanwhile, landlords are leaning on green leases and ESG-compliant buildings to draw tenants willing to pay a premium to check their sustainability boxes, Samuel Oh finds out. Buzzy details such as carbon counts and smart buildings that monitor energy and water usage aren’t just good-to-have, but are now must-haves. Occupiers are coming in with checklists to fulfil their own environment, social and governance criteria. And some landlords that have built in these requirements have been able to command higher rents. 

The city’s best-in-class buildings have, in fact, netted about 71 per cent improvement in energy efficiency compared to 2005 levels. But getting to the 80 per cent target that Singapore has set could be a challenge, Building and Construction Authority (BCA) chief executive officer Kelvin Wong tells Jessie Lim. In an interview with BT, he sets out what needs to be done.

After a quiet year, the collective sales market remains en blocked, industry players tell Ry-Anne Lim. There is interest, however, in commercial deals.

In other markets

UK residential property markets could do better than expected in the year ahead, our correspondent Neil Behrmann reports. Data from one of the biggest mortgage lenders showed UK house prices finished 2023 little changed from a year ago, defying predictions for a sharp downturn. Prices fell - less than expected - and a shortage of properties on the market along with robust demand helped the market hold up.

On the other side of the pond, things look gloomier. The Financial Times reported that US office owners face a US$117 billion wall of debt repayments in 2024, with pain likely to be widely spread as landlords struggle to refinance at current interest rates. Billions in losses from bad loans could wipe out some developers, the FT report said. 

One of Europe’s biggest property companies, Signa Development, has already filed for insolvency with debts of around US$1.28 billion, and has put its stake in New York’s Chrysler Building up for sale to raise cash. 

Real estate stress is also brewing in Asian markets other than China. Analysts are expecting China’s housing slump to worsen, and the latest data shows China home sales fell further as policy shifts failed to stem the decline.