URA overall private home price index rises at slower pace of 0.9% qoq in Q2, against Q1 increase of 1.4%
Rental index of private homes falls for the third consecutive quarter; 0.8% drop in Q2 follows a 1.9% dip in the previous quarter
[SINGAPORE] Singapore’s private residential sector continued to post further moderation on both the price and rental fronts in the second quarter of this year, latest official statistics indicated.
The Urban Redevelopment Authority’s (URA) widely watched overall private home price index still rose, but at a slower pace of 0.9 per cent in Q2 2024 over the previous quarter, compared with the 1.4 per cent quarter-on-quarter (qoq) gain in Q1 2024 and 2.8 per cent increase in Q4 2023.
The Q2 increase in the price index released by the URA on Friday (Jul 26) was lower than the 1.1 per cent gain for the flash estimate announced on Jul 1.
URA’s overall rental index for private homes fell for the third consecutive quarter, though the decline has decelerated. Rentals dipped 0.8 per cent in Q2 2024, after easing 1.9 per cent in Q1 2024 and 2.1 per cent in Q4 2023.
Putting things in perspective, Leonard Tay of Knight Frank Singapore noted the overall rental drop of 2.7 per cent in the first half of 2024 is in stark contrast to the full-year increases of 8.7 per cent in 2023 and 29.7 per cent in 2022.
“The landlord’s market has passed, and the balance of power has swung towards tenants,” said Tay, who is research head at the property consulting group.
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Tricia Song, head of research for South-east Asia at CBRE, noted that URA’s rental index has cumulatively fallen by 4.8 per cent from the peak in Q3 2023. However, it is still 50.9 per cent above the most recent low in Q3 2020 during the Covid pandemic.
Nicholas Mak, chief research officer at Mogul.sg, said the deceleration in the rental decline is likely due to the small volume of new private home completions in H1 2024.
“In 2023, a total of 19,968 private housing units were completed, which translated to an average of 9,984 units over a six-month period. In the first half of 2024, the supply of newly completed private housing plummeted to just 2,123 units,” he said.
“This, rather than an actual improvement in leasing demand, contributed to the slower rental decline,” Mak added.
The vacancy rate of completed private homes improved to 6.1 per cent as at end-Q2 2024 from 6.8 per cent as at end-Q1 2024. This reflects the “progressive digestion of last year’s bumper crop of private home completions”, said Song.
In the first half of this year, developers completed 2,123 private homes. Based on expected completion dates reported by developers, another 6,975 units are expected to be ready in the second half, which will take the full-year figure to 9,098 units. The completion for next year is expected to decrease to 5,306 units before rising to 7,795 units in 2026 and 9,760 units in 2027.
Lee Sze Teck, senior director of data analytics at Huttons Asia, said: “There may be firmer leasing demand in the months ahead from an improving employment market. Rents are likely to stabilise and bottom out in H2 2024.”
Knight Frank expects URA’s private residential rental index to contract by 7 to 10 per cent for the whole of 2024.
CBRE’s Song said: “We maintain our forecast of full-year rent decline of 5 per cent, led by RCR (Rest of Central Region) and CCR (Core Central Region) properties which have higher vacancy and upcoming completions.”
Cushman & Wakefield’s head of research for Singapore and South-east Asia, Wong Xian Yang, projects a “mild fall of up to 5 per cent” in URA’s overall private residential rental index in 2024. “However, rents could stabilise by 2025, as new completions in 2025 and 2026 will fall to an average of about 6,551 units annually each, significantly lower than the 10-year average of 13,275 units,” he added.
Industry players noted that the pace of increase in private home prices has been flattening in recent quarters due to home buyers becoming increasingly selective and cautious amid still-high interest rates and global uncertainties. A dearth of new launches has also led to weak private homes sales in the primary market.
Developers sold 725 private homes in Q2 2024, the lowest on a quarterly basis since the 690 units that were shifted in Q4 2022, said PropNex. This took new private home sales to 1,889 units in H1 2024 – which is a record low half-yearly sales tally, lower than the 1,977 units sold in H2 2008 amid the global financial crisis.
However, the number of private homes sold in the resale market jumped 41.4 per cent to 3,802 units in Q2 2024 from 2,689 units in Q1 2024.
Said PropNex Realty CEO Ismail Gafoor: “A dearth of suitable new units due to limited project launches and the still sizeable price gap between new and resale private homes have helped to put the wind in the sails of the resale market, amid buyers being very price sensitive.”
For the full-year 2024, PropNex projects that developers’ sales could come in at around 5,500 to 6,000 private homes, while overall private home prices could climb by 4 to 5 per cent.
“A number of factors could be supportive of the private residential market in the second half of the year. They include stabilising home prices, more new launches, potential pent-up demand due to the softer sales we have witnessed of late, as well as the prospect of rate cuts – at least one, possibly two, according to some economists – by the US Federal Reserve, which will have an impact on borrowing costs and help to improve affordability,” said Ismail.
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