SINGAPORE – Despite concerns over rising mortgage rates and a potential slowdown in the global economy, Singapore’s property market continues to defy expectations, with new condominium launches hitting record high prices in 2023.
The recent launch of The Continuum, an 816-unit freehold condominium in Thiam Siew Avenue off Tanjong Katong Road, saw the average selling price per square foot (psf) soar to $2,732, marking a staggering 17 per cent increase from the average price of $2,340 psf for new sales of freehold properties in the city fringe over the past 16 months from January 2022.
To put this into perspective, for the same average psf price 10 years ago, buyers could have bought a property in District 9 or 11 in the core central region (CCR). Duo Residences, a luxurious development in Bugis, was sold at an average price of $2,000 psf when it was launched in 2013.
Just a stone’s throw from The Continuum, Tembusu Grand in Tanjong Katong, which was launched in April, reported the highest average selling price of $2,465 psf for a 99-year leasehold development in the same rest of central region (RCR) market segment.
The development with the highest per sq ft price in the outside central region is the 99-year leasehold Sceneca Residence, located in Tanah Merah Kechil Link. The 268-unit development sold 60 per cent or 160 of its units on the first day of its launch in January, at an average price of $2,072 psf.
Until May, there had not been any new launch in the central region in 2023.
Market watchers said they are not surprised by the rising prices of new condo launches, as it would be natural for developers to take the opportunity to raise prices during a bull market, the same trend that was seen during the last residential property peak in 2013.
Provost’s Chair Professor Sing Tien Foo of the Department of Real Estate at the National University of Singapore said psf prices have been setting new benchmarks since July 2022, when projects like AMO Residences and Lentor Modern, which are both located outside the central region, broke the $2,000 psf benchmark.
Prices of new RCR launches have also increased very strongly, closing the gap with other projects in the CCR, with units priced between $2,700 psf and $3,000 psf, noted Prof Sing.
Ms Tricia Song, head of research for South-east Asia at CBRE, said the price surge for new launches could be driven by several factors, including strong demand for private homes, especially from upgraders who are supported by high resale prices in the Housing Board market, pent-up demand from weak developer sales during the Covid-19 pandemic, and a resilient job market and strong wage growth leading to strong household income and savings growth.
There could also be an element of Fomo (fear of missing out) following reports of investors making high returns from strong capital appreciation of properties in recent years.
This, coupled with record rents and yields, makes properties look like highly attractive investments, added Ms Song.
Property portal Mogul.sg’s chief research officer Nicholas Mak said higher land prices and construction costs could also be driving the record new launch prices as developers seek to pass on the higher costs to buyers.
Given the slower take-up rate of new launches this year, prices could have reached resistance level and are likely to be stable for the rest of this year, Ms Song added.
She noted that headwinds such as uncertainty in the economy and job security, and elevated interest rates have started to make an impact, citing the slower transactions observed in 2023 compared with a year ago.
The Continuum sold just 26.5 per cent or 216 out of 816 units during its launch in the first weekend of May, while Tembusu Grand sold 53 per cent or 340 of its 638 units during its launch weekend. Blossoms by the Park in Buona Vista, launched on April 29, two days after new property curbs kicked in, sold 75 per cent or 205 of its 275 units on the first day, at an average price of $2,434 psf.
A Singaporean, who wanted to be known only as Mr Tan, bought a three-bedder at Blossoms by the Park for about $2.3 million during its launch. The 46-year-old accountant, who lives in a condo under his wife’s name, said he is optimistic that property prices will continue to rise, and decided to make the purchase as an investment.
“Singapore property prices always go up in the long term,” said Mr Tan, who did not have to pay an additional buyer’s stamp duty as it was his first property.
“If prices go up after three years, I may sell it for capital gain. With the current high interest rate that I will be paying, I am looking at a capital gain of 15 to 20 per cent before I will sell it. Otherwise, I will rent it out after it’s completed.”
In an elevated interest rate environment, buyers of big-ticket items such as property should always exercise caution and not over-leverage their finances, experts warned.
Ms Jacquelyn Tan, head of group personal financial services at UOB, said: “As a general rule, home buyers should be cognisant of the 50-30-20 rule, where 50 per cent of savings is allocated for essential expenses such as insurance and debt payments, 30 per cent is saved or invested, and 20 per cent is used for other general expenditure.
“Home buyers should factor their monthly mortgage payments into this framework, and ensure that they have buffered enough for the other categories before signing on the dotted line.”
Ms Tan said she expects home loan demand to be more subdued in the coming months, as customers are more prudent about home purchases due to affordability concerns.
Ms Sandra Ong, acting head of mortgage at Citibank Singapore, said: “Home buyers concerned about the financial commitment on their mortgage loans should consider taking a longer fixed-interest-rate package to limit the volatility that comes with a floating-rate package.”
Those who are buying for investment purposes should know that the key risk would be the sustainability of rental income as the current high rents may fall when new supply comes through, said Ms Song of CBRE.
“Before buying an investment property, always plan for an exit. If there are a lot of cheaper comparable options in the vicinity, you may not be able to liquidate your position fast, especially if your property does not have unique selling points,” she added.
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