SINGAPORE – Private residential prices are expected to rise moderately in 2023, with upside limited by higher borrowing costs, weaker economic growth and slower growth in HDB resale prices.
Even with a robust rental market and low unsold new home stock, the private residential market will likely face headwinds in 2023, as housing affordability will be a key concern for buyers grappling with rapidly rising interest rates, spiralling living costs, an uncertain economic outlook and the latest property curbs.
But while some buyers may delay their purchases, high land and construction costs and low inventory may leave developers with little room to cut new launch prices. As a result, analysts see private residential prices gaining between 1 per cent and 5 per cent in 2023, down from a forecast of 9 per cent for full-year 2022.
Private residential prices will see slower growth and may even correct slightly in the second half of 2023, said Ms Catherine He, director and head of research at Colliers Singapore.
“Higher mortgage payments and a surge in living costs could increase the risk of some home owners being pushed into negative equity. Consequently, they may have to reduce asking prices if they face difficulties refinancing. Higher mortgage costs may also put off mass-market buyers, who are most reliant on financing,” she said.
But PropNex Realty chief executive Ismail Gafoor said he does not expect this to be widespread, as most Singaporean households are financially resilient. “We expect most sellers to hold to their asking prices amid healthy resale demand, including from those priced out of new launches.”
Hit by two rounds of cooling measures, in December 2021 and September 2022, developers pulled back on new launches in 2022. There were also fewer new units available for launch in 2022 because many Government Land Sales (GLS) tenders were stalled in 2020 due to the Covid-19 pandemic, and there were few collective sales in the past three years, said Ms Tricia Song, CBRE’s head of research for South-east Asia.
As a result, only about 4,300 non-landed units and 1,900 executive condominium (EC) units have been launched so far in 2022, said Edmund Tie.
And even though 2023’s launch volumes are projected to be higher – an estimated 6,000 to 8,000 new units – these will still fall short of the more than 10,000 units (excluding ECs) launched each year from 2019 to 2021, it said.
Meanwhile, housing supply (including ECs) on the confirmed list of the first-half 2023 GLS programme was raised to 4,090 units, the highest since the first-half 2014 release, noted Edmund Tie’s head of research and consultancy Lam Chern Woon.
“The higher injection of GLS supply will meet developers’ needs to replenish their land banks, but given the longer lead time between tender launch and tender award, as well as between tender award and project launch, the price impact from the increased supply may be muted.”
Typically, a project launch may take place nine to 12 months after the site is awarded, Mr Ismail said.
“So we don’t think that many sites offered in 2023’s GLS will be launched in the market next year. Given that the increase in GLS supply is moderate, we don’t think there will be a big impact on prices,” he added.
ERA Realty’s head of research and consultancy Nicholas Mak expects more land sales in the southern region as the Urban Redevelopment Authority moves to rejuvenate the Central Business District and Marina South into a “live, work and play” district.
The number of completions or private homes obtaining temporary occupation permits may reach a seven-year high of 18,234 units (excluding ECs) in 2023, which should help alleviate pressure in the tight rental market, said Ms Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie.
More than 9,000 completed units in projects such as Treasure at Tampines, Parc Clematis and Piermont Grand are in the suburbs, up from an estimated 2,336 units in 2022. More than 6,600 completed units are in the city fringe, while 2,478 units will be in the prime district, she said.
Overall private residential rents have surged 20.8 per cent year on year as at the third quarter of 2022, and could continue rising in 2023 as landlords seek to pass on higher mortgage costs and property taxes to tenants, Ms Song said.
Ms Chia Siew Chuin, head of residential research at JLL Singapore, sees rent increments slowing to 5 per cent growth year on year in 2023, as new supply ramps up and demand moderates.
While the 15-month wait-out period imposed under the September 2022 cooling measures will support rent growth, a weaker global economic outlook may reduce leasing demand from expatriates, Ms Chia added.
Rent growth may peak in the first half of 2023 and then slow as price resistance kicks in, Mr Ismail said. “Barring a prolonged economic downturn – which may see companies hold off on increasing expat headcount or cut their housing budget – we remain relatively positive about the leasing market.”
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