Singapore CBD

After a robust performance in the second quarter of this year, the price of privately owned homes increased at a more moderate rate of 3.8% during the 3rd quarter of this year.

The increase of 4.4% seen this quarter in the prices of non-landed properties across Singapore was a primary factor in driving up overall housing costs.

According to real estate figures that were provided by the Urban Redevelopment Authority (URA) on Friday, the private residential property price index grew to 187.8, which is an increase from the second quarter’s reading of 180.9.

The price of non-landed properties increased by 4.4%, which is an increase from the 3.6% price increase seen in the previous quarter.

Prices of non-landed homes in the core center region increased by 2.3 percent, which is a significant increase from the previous quarter’s increase of 1.9 percent.

Those in the remainder of the central area had theirs increase by 2.8%, which is a lower increase when compared to the 6.4% surge seen in the previous quarter.

The largest increase was seen in the prices of non-landed properties located outside of the central region. These prices rose by 7.5% during the third quarter, which was an increase from the 2.1% seen during the previous quarter.

“When broken down by market category, the most significant price increase occurred in the suburbs or outside of the central region, where it was 7.5%. Since the third quarter of 2009, this is the quarter with the greatest quarterly gain “Christine Sun, senior vice president of research and analytics at OrangeTee & Tie, stated that the percentage had been 16.1 percent at the time.

According to the senior director of research at Huttons Asia, Mr. Lee Sze Teck, there were three large launches in this region during the third quarter: AMO Residence, Lentor Modern, and Sky Eden@Bedok. These major launches are presumably the factors behind the increase in pricing.

When compared to the prior quarter’s gain of 2.9 percent, the price of landed properties had a decrease of 1.6 percent in growth during the third quarter of this year.

During the third quarter, resale transactions accounted for approximately 60.5 percent of the total number of selling transactions. In comparison to the previous three months, when there were 4,236 units sold, there were only 3,719 resale transactions.

Ms. Sun stated that “rising interest rates and higher prices” were to blame for the decrease in the number of people who purchased private property during this quarter. She referred to URA data that demonstrated a 9.7 percentage point drop in sales volume between the second and third quarters of this year.

 

Rental grew at fastest rate since 2007

The rental of private residences reached a new high during the third quarter, posting an overall growth of 8.6 percent to record a new peak. This comes after a rise of 6.7 percent during the preceding quarter.

According to Ms. Sun, rent prices have increased by 20.8% over the course of the first nine months of this year. She went on to say that “Tenant budgets are stretched to new limits” as a consequence of the fact that rents increased at the quickest quarterly pace since the third quarter of 2007.

In the core central region, rental prices for non-landed properties went up by 7% during the third quarter, which is a decrease from the 7.7% growth that was seen during the second quarter. The rest of the central region had a rise of 9.6%, which is significantly higher than the growth of 5.9% seen over the course of the previous three months.

Rentals of non-landed properties located outside of the central region increased by 8.8 percent, which is an increase from 7.7 percent, while landed properties rental increased by 10.9 percent in the third quarter, which is a significant increase from the 3.2 percent increase seen in the previous quarter.

Ms. Sun observed that as “demand far outstripping supply and flats readily picked up by the highest bidder,” many landlords have boosted their asking prices to levels that are higher than the value of the market.

As a direct consequence of this, occupants are signing lengthier leases, sometimes for as long as three years, “to secure units and lock in better prices,” as Ms. Sun stated.

In addition, she mentioned that rising interest rates and inflation are contributing to the deterioration of the situation. “More landlords are passing on their rising mortgage repayments and living costs to tenants,” Ms. Sun added, “placing a stress on tenants’ ability to pay their rent.”

She cautioned renters not to expect a “short respite” from skyrocketing rent rates, as the tendency of tenants signing lengthier leases will have an influence on the amount of homes available for rental, which may cause demand to increase.

A wait-out period of fifteen months will be imposed on private homeowners who purchase secondary HDB resale flats, which will contribute to an increase in demand for these properties. Ms. Sun stated that it is likely that they will rent in the interim, which will drive demand.

On September 30th, Singapore implemented a number of property cooling measures, one of which is a new wait-out term of 15 months for private homeowners who sell their property prior to submitting an application to acquire a HDB resale apartment.

Mr. Lee of Huttons’ stated that another reason for robust rental demand in the third quarter could have been the return of international students to Singapore and the continued hiring of expats. Both of these factors are possible contributors.

Additionally, according to Mr. Lee, there has been “movement of tenants due to rising rental, which have caused some of them to be relocated because they have exceeded their budget.”

“Some of them have moved from the core central region to the rest of the central region, while some of them have moved from the rest of the central region to outside the central region,” he said, adding that this has contributed to an increase in rent prices in both the central region and the surrounding area.

According to Ms. Sun’s observations, the rate of growth in rental prices might decelerate around the middle of 2023 because more residences are expected to be finished next year.

 

Supply in the Pipeline

During the third quarter, Developers put up for sale 1,455 unfinished private residential units, excluding ECs. This is a decrease from the 1,956 units that were put up for sale during the previous quarter.

The third quarter saw a total of 2,187 private residences, excluding ECs, change hands. This is a little decrease from the 2,397 private homes sold by developers in the two prior quarters combined.

During this quarter, there was no offering of EC units for sale, and there were only 28 sales of similar units. During the previous quarter, developers put up for sale a total of 616 EC units and sold 193.

According to the URA, a total of 3,619 units, including ECs, are anticipated to be finished in the year 2022. In the following year, 2023, another 20,098 units, including ECs, are anticipated to be finished.

It is anticipated that a total of 28,800 units, including ECs, will be finished in the years 2022 and 2023. This is over three times the number of units that will be finished in the years 2020 and 2021 (10,400).

The Urban Redevelopment Authority (URA) stated that “this will help to cater to housing needs in the immediate term.” “Further supply that has planning clearance, which will total approximately 31,400 units as of the (third quarter of 2022), will be finished after 2023.”

 

Outlook of Singapore Real Estate

Real estate is “widely regarded as a safe-haven asset or a hedge against inflation,” according to Ms. Sun, which may be why investors are choosing to invest in it rather than equities and other riskier assets. Other possible reasons include rising interest rates, geopolitical tensions, and the possibility of a global recession.

She said that “strong household balance sheets, a tight domestic labor market, and income growth” will also increase housing demand, and that even though rising mortgage rates and prices are putting pressure on buyers, some of them will still buy property before interest rates rise even more.

According to what she had heard, the prices of privately owned homes are expected to increase by between 9 and 11 percent this year.

“The impact that increased mortgage payments are having on investors and landlords is currently being mitigated by steadily rising rents. Some property owners may have trouble keeping up with their obligations if interest rates on mortgages continue to rise and the number of newly built properties on the market increases in the coming year “Ms. Sun issued a caution.

The position is likely to become even more precarious if the cost of living and property taxes continue to rise.