2022 has been described as the year of the crypto crash, when virtual currencies suddenly lost their lustre, even before many could wrap their heads around what they were. The stock market didn’t fare well either, as tech stocks plummeted, with the Nasdaq Composite index falling by a third.
However, brick-and-mortar real estate in Singapore has not only weathered the crypto storm in the background, but has also gone on to scale greater heights, notwithstanding factors like the Ukraine war, post-pandemic inflation and worldwide supply chain crunches.
Various market watchers and analysts appear to agree on a number of trends in the Singapore real estate market.
Gap in luxury property?
As Singapore continues to shine as a desirable destination for ultra high-net-worth individuals to live in, it is becoming apparent that there is a gap in uber-luxury apartments like those in leading global cities such as Hong Kong, New York and London. This is an observation by a veteran private client property consultant, who noted that the gap in this segment remains highly relevant as only Singapore citizens and exceptional permanent residents are permitted to build and own their bespoke trophy Good Class Bungalows.
Our tiny red dot of a city boasts some of the highest land costs in the world, yet UHNW clients may struggle to find a range of aspirational apartment homes in Singapore with the fittings and features on par with, say, 432 Park Avenue in New York, No. 1 Grosvenor Square, London or The Opus in Hong Kong. Undoubtedly, statement properties by their very exclusive nature are not easily sold. The stamp duty rules in place also do not incentivise developers to acquire land sites to build such properties, because hefty stamp duty payments apply if unsold inventory remains five years after the developer’s original land acquisition.
However, this is undoubtedly a segment with real demand, and it remains to be seen if our existing property regulations can be finetuned to encourage developers to fill this gap in the residential real estate market, so that we can truly come into our own as a top global city.
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Best of both worlds
The pandemic was the major reset button no one saw coming. Pre-pandemic and pre-lockdown, major corporations never had to test contingency capabilities in terms of skeletal staff strength in the office supporting everyone else working from home. During the pandemic, employees themselves found reserves of energy to work almost non-stop, blurring the once clearer boundary between work and home, and creating concerns over personal wellness along the way.
As Covid receded and movement restrictions eased, upgrading one’s lifestyle took on an urgent impetus. Hybrid flexible working policies became an important distinguishing factor when it came to hiring and retaining talent.
In the office sector, hybrid working didn’t result in corporations and businesses shrinking their real estate footprint at the end of their existing lease terms for significant cost savings, as some predicted. People now want the best of both worlds – face-to-face interaction and office socialising opportunities to build camaraderie within work teams, coupled with the flexibility on some days to be at home with your pet to do work that did not require human interaction. Indeed, many businesses and corporations have found that to “right-size” their office spaces, the overall trend was towards maintaining rather than shrinking their office space. We are also seeing a trend towards hybridisation away from single-purpose property types.
Prices not coming down
Prices are unlikely to come down across the real estate segments, but the rate of price increases may moderate somewhat.
Local resident demand remains very strong. Extended work-from-home arrangements made many people relook at their work/home environments. Many emerged from the pandemic with new pets (including esoteric plants) and a family fleet of designer bicycles. It was unsurprising that once the rules were relaxed to allow for home viewings, upgraders took to the market with a vengeance, seeking out larger prime-location units. New-launch condominium prices in suburban parts of Singapore breached a new S$2,100 psf record, and the average freehold new launch price in core central region areas averaged S$3,000 psf and more. Prices which were once eye-watering are now accepted as the new norm. At the rarefied top end of the market, the entry purchase price point for a GCB has also almost doubled from five years ago.
The Singapore government has also largely succeeded in marketing Singapore to the world as a safe, well connected, politically stable and business-friendly place, and this has also attracted a lot of private wealth. The results are evident in the jump in the number of single family offices (SFOs) in recent years.
These initiatives, along with the progressive reopening of borders elsewhere, translated into a steady influx of new residents, driving average rental rates up in 2022 by up to 25 per cent. At the top end of the market, reported GCB rentals topped S$200,000 per month. There is a general sense that the available inventory of larger-sized condominium units and even newly developed GCBs for rent is limited in the face of the overwhelming demand. Transaction activity slowed in Q4 2022, as the latest round of property cooling measures (largely targeted at the public housing market) took effect, coinciding with soaring mortgage interest rates. However, this is anticipated to pick up again after the Chinese New Year, albeit possibly with a more moderate rate of price increases.
Buoyant market
All in all, despite near-term headwinds caused by inflationary pressures, spiking interest rates and a potential global downturn round the corner, the Singapore real estate market is likely to remain buoyant in 2023, as the post-pandemic opening up of economies continues to spur the transformation of our urban landscape.
The writer is partner in both the real estate and banking teams at Withers KhattarWong
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