For those who are not familiar with Singapore’s residential property sector, some of the recent headlines and data points paint a troubling picture of a market that is experiencing a steep downturn.
In the first half of this year, sales of new private homes fell to their lowest level for the first six months of a year since 2004, when the city state’s Urban Redevelopment Authority began compiling data. As OrangeTee notes, the number of transactions was even lower than in the first half of 2008, when the global financial crisis was beginning to erupt, as well as the first half of 2020 when the Covid-19 pandemic struck the world economy.
Prices of private properties, including executive condominiums, grew just 0.9 per cent on a quarterly basis in the second quarter. In the core central region, which bore the brunt of the government’s controversial decision last year to double additional stamp duties for foreigners buying properties to a staggering 60 per cent, prices of condominiums and flats contracted 0.3 per cent, the third quarterly decline in the last five quarters.
The rental market is also under pressure. Rents have fallen for three straight quarters, contracting 2.7 per cent in the first half of this year. In the luxury segment, Singapore was the worst-performing market in the first quarter of this year among 15 leading residential letting markets across the world tracked by Knight Frank.
Yet while these figures attest to a slowdown, they need to be put in context. First, sales of new homes have collapsed because developers are launching fewer projects. Launch volumes tend to go hand in hand with transaction activity in Singapore’s residential market. In the first half of this year, developers launched 1,938 private units, compared with 7,551 for the whole of 2023, according to data from property portal Mogul.sg.
Although homebuyers have become more price-sensitive and demand from Chinese buyers – a crucial source of foreign demand in the luxury market – has waned, “developers have been spoiled”, said Nicholas Mak, chief research officer at property portal Mogul.sg.
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Singapore government doubles residential property tax for foreigners to 60 per cent
Singapore government doubles residential property tax for foreigners to 60 per cent
Having grown accustomed to offloading their stock at a fast pace during the past several years because of the prolonged upturn in Singapore’s housing market, developers are reluctant to sell their units at a discount despite the more challenging market conditions.
Unlike in Hong Kong, inventory levels are low and developers are not under intense pressure to launch their projects quickly. Many of them can afford to wait for some time before the government claws back the remittable component of the stamp duty they paid on the purchase of land if they fail to offload their stock within five years of acquiring the site.
Second, while the primary market has slowed, the secondary market is booming. The number of resale transactions in the second quarter reached their highest level in two years. This increased the secondary market’s share of private home sales to 77.4 per cent, the highest proportion since 1996, according to PropNex.
In the rental market, although prices fell 2.7 per cent in the first half of this year, partly because of a surge in completions that increased the rental stock, the decline barely puts a dent in a market that has been going gangbusters. In 2021-23, rents grew 48.3 per cent, making Singapore one of the world’s hottest rental housing markets. “This is not a downturn. It’s a siesta,” Mak said.
A couple enjoying a walk in Singapore with public housing flats in the background. Photo: Shutterstock
Third, any assessment of the performance of Singapore’s residential property market must devote particular attention to the city state’s public housing system. It has long been admired for providing safe, clean and spacious flats that house 80 per cent of Singaporeans, the vast majority of whom are owner-occupiers.
In the first half of this year, sales of second-hand flats built by the Housing and Development Board (HDB), Singapore’s public housing authority, reached their highest level in three years. Moreover, 419 flats were resold for at least S$1 million (US$754,000) each, compared to 469 for the whole of 2023, according to OrangeTee data.
Although S$1 million-plus sales account for just 3 per cent of HDB resale transactions, the increase in speculative demand is contributing to the buoyancy in the market. This has become a source of frustration for the government, which has taken measures to regulate and temper demand in the public housing system, a pillar of social policy in the city state and a crucial political tool for the ruling People’s Action Party.
Residential high-rise towers are pictured in Singapore on July 3. While the pace of growth in prices and rents has slowed, the government is still concerned about the risk of overheating. Photo: AFP
In September 2022, the government imposed a temporary 15-month “wait-out” period that private property owners – with the exception of those aged 55 and above – must serve before buying an HDB resale flat. In August 2023, it announced a revised classification system for new resale flats that included longer minimum occupation periods and stricter resale conditions to curb speculative demand.
Both initiatives attest to the strong appeal of the public housing system, which boasts well-maintained buildings and grounds that are periodically upgraded with new lifts and walkways. “The private resale market is feeding off demand from the public one and vice versa,” Mak said.
The reality is that Singapore’s housing market has not experienced a proper downturn in almost a decade. While the pace of growth in prices and rents has slowed significantly, the government is still concerned about the risk of overheating. If there is a slowdown in Singapore’s property market, it is a normalisation of activity after years of explosive growth.
