LATEST government data on Singapore’s private housing market for the third quarter points to signs of prices stabilising, on the back of high interest rates, cooling measures and cautious economic sentiments denting buying demand.

In the leasing market, too, there is a semblance of demand-supply balance starting to materialise, with continued moderation in rental growth, amid a jump in housing completions this year, especially in Q3.

The view on price stabilisation is taking root among market watchers, notwithstanding the 0.8 per cent quarter-on-quarter rise in the Urban Redevelopment Authority’s (URA) overall private home price index in Q3 2023. This was a bigger gain than the 0.5 per cent increase reflected in URA’s flash estimate released on Oct 2 and contrasts with a dip of 0.2 per cent quarter on quarter in the second quarter of 2023, after the latest property cooling measures were rolled out in late April.

From a year ago, the benchmark index is now up 4.4 per cent. That may seem to be out of sync with the current soft sentiment on the macro-economic and geopolitical fronts.

Putting things in perspective, however, Knight Frank Singapore research head Leonard Tay said: “URA’s overall private home price index for Q3 2023 reflects a 3.9 per cent gain over the Q4 2022 level. We are projecting a full-year 2023 increase in the 4-plus per cent range. This would mark a substantial slowdown in price growth after the hikes of 8.6 per cent in 2022 and 10.6 per cent in 2021.”

Another sign of stabilisation in the market is the 3.5 per cent drop in the total number of private homes sold to 5,201 units in Q3 2023 from 5,388 units in the previous quarter. There were declines in both developer sales and in the resale market, though sub-sale volumes rose to 355 units in Q3 2023 from 285 units in Q2 2023.

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Cushman & Wakefield’s heard of research for Singapore and South-east Asia Wong Xian Yang said: “Overall sales volume has been tempered as home buyers are increasingly selective and price-sensitive due to a confluence of factors such as elevated financing costs, a wide selection of new launch options in the pipeline, recent cooling measures and economic uncertainties. Some buyers are waiting on the side lines, in the hope of lower prices.”

Tricia Song, head of research for Singapore and South-east Asia at CBRE, noted that take-up rates for new private residential launches are generally lower than last year’s as buyer fatigue and resistance to high price points have set in.

URA data showed that developers launched 2,805 uncompleted private residential units for sale in Q3, up from 2,374 units in the previous quarter. However, the number of private homes they sold fell 8.5 per cent to 1,946 units in Q3, from 2,127 units in Q2.

The 2,900 resale transactions in Q3 were also 2.6 per cent lower than the 2,976 units in the previous quarter. Resale transactions accounted for 55.8 per cent of all sale transactions in Q3, a tad higher than the 55.2 per cent share in the prior quarter.

Growing headwinds

Nicholas Mak, chief research officer of Mogul.sg, expects the overall number of private housing units sold in the primary and secondary markets this year to range from 18,000 units to 19,300 units, lower than the 21,890 units transacted last year.

He attributes the drop to “growing headwinds for the residential property market in the coming months, such as a weakening rental market, rising unsold inventories, high borrowing costs and economic uncertainty”.

URA’s overall rental index for private homes rose 0.8 per cent quarter on quarter in Q3. This was a smaller quarter-on-quarter increase compared with the gains of 2.8 per cent in Q2 and 7.2 per cent in the first quarter this year.

Year on year, the index is up 19.3 per cent.

URA highlighted that rental increases have moderated for four consecutive quarters, with the 0.8 per cent rise in Q3 2023 the smallest quarter-on-quarter gain since the fourth quarter of 2020.

Tay of Knight Frank predicts rental movements navigating between minus 1 per cent and plus 1 per cent in the upcoming quarters.

CBRE’s Song too expects rents to start easing over the next few quarters. Mak projects URA’s rental index still expanding by 11 per cent to 13 per cent this year. In 2024, it could start to contract and post a full-year drop of 6 per cent to 12 per cent.

“The rental market is turning into a tenant’s market,” he added.

URA’s overall private residential rental index surged 29.7 per cent last year after rising 9.9 per cent in 2021. A sharp fall in housing completions due to Covid-related construction interruptions and global supply-chain disruptions was a key factor behind the rental surge.

Going by URA’s data, the vacancy rate for private homes rose to 8.4 per cent as at end-Q3, from 6.3 per cent in Q2 and 5.7 per cent in Q3 2022.

The slower growth in the rental index in Q3 2023 came amid a spike in the number of private housing units completed during the quarter to 8,517 units, taking the tally for the first nine months to 15,883 units.

Including another 3,167 private homes slated for completion in Q4 2023, the full-year figure is expected to be 19,050 units, which would be the highest since 2016, when 20,803 private homes were completed.

Next year, 9,875 private homes are set to be ready, based on expected completion dates reported by developers to the authorities.

Added Mak: “As more private and public housing units are completed in the coming months, local residents who were renting their accommodation, while waiting for their new homes to be completed, may not renew their leases.”

CBRE’s Song, too, said: “Expatriate demand could moderate as companies restructure and cut back on hiring amid challenging economic conditions.”