Buyers wait for rate cuts or delay market entry; August private home resale volume dips 1.7%

Singapore's non-landed private residential resale volume stood at 1,080 units in August, a 1.7% decrease compared to July, while resale prices remained flat. Analysts believe that as more new project launches come onto the market, resale market activity is poised for a boost, with price-sensitive buyers providing support for private resale transaction volumes.

Flash estimates show that although overall non-landed private home resale volume in August this year was lower than in July, it was significantly higher by 16.8% compared to the same period last year, and 5.2% above the five-year average for the month.

Analysts generally believe that buyers chose to defer their purchasing decisions in anticipation of an interest rate cut announcement by the US Federal Reserve in September.

Lower interest rates typically have a positive effect on the property market, and she believes that the onset of a rate-cutting cycle could give an even greater boost to the resale property market. This is because buyers of resale private homes are required to service the interest on their full loan amount upon signing the sale and purchase agreement, whereas buyers of new private homes generally benefit from a progressive payment scheme.

Historical data indicates that private home resale volumes tend to increase when interest rates decline, though there have been exceptions. For instance, resale transactions fell sharply following the introduction of the Additional Buyer's Stamp Duty (ABSD) in December 2011; similarly, despite interest rates remaining at low levels in 2013, resale volumes moderated once the Total Debt Servicing Ratio (TDSR) framework was rolled out.

Analysis: New Private Home Launches Expected to Stimulate Resale Market

Some analysts consider the decline in private home resale volume to be temporary, suggesting that the launch of new projects in September and October will help invigorate buying sentiment in the resale market.

New project launches will spur buyers into the market, and after comparing new and older private residential units, more price-sensitive buyers may opt for resale units.

The price gap between new launches and resale private homes remains wide, which continues to attract prospective buyers and further underpin demand in the resale market.

Data reveals that in the 12-month period from September 2023 to August this year, the private resale market accounted for 68% of total private home transactions. In the 12 months prior to the implementation of the property cooling measures in April last year, resale transactions made up 62.3% of the total.

The cooling measures introduced in April last year have effectively curbed purchases of private residential units by foreigners and entities. Prior to the measures, resale units purchased by foreigners and entities accounted for 3.7% and 7.8% respectively. In the 12 months leading up to August this year, resale transactions by foreigners and entities plummeted to 1.3% and 0.1% respectively.

Resale Transactions Most Active in Outside Central Region

The report revealed that private home resale transactions in the Outside Central Region (OCR) remained the most active, accounting for 52.2% of total resale volume, followed by the Rest of Central Region (RCR) at 29.2%, and the Core Central Region (CCR) at 18.5%.

In terms of private resale prices, prices held steady in August and registered a 4.6% year-on-year increase. By market segment, resale prices in the RCR rose by 0.9% month-on-month compared to July, prices in the OCR remained unchanged, while resale prices in the CCR dipped by 0.6%.

Analysts project that private resale price growth for the full year will range between 4% and 6%.