Can Property Prices Sustain Their Strong Three-Year Momentum?

Over the past four years, unprecedented disruptions caused by the pandemic led to a tight housing supply alongside robust housing demand.

The Government ramped up the construction of new Build-To-Order (BTO) flats and private housing units to balance demand and supply. 

In 2023, around 21,400 HDB flats and 21,300 private homes were completed, totalling over 40,000 units. This marked the highest number of homes completed across both HDB and private markets in a single year since 2018.

Demand in both the private and public housing markets has shown signs of moderation, accompanied by a decline in transaction volumes. Compared to 2022, total transaction volumes for private housing and HDB resale flats fell by about 13% and 4% respectively in 2023.

In 2023, the BTO application rate for first-timer families across all flat types stood at 1.9, down from 3.7 pre-pandemic in 2019.

Property price growth has also moderated. According to flash estimates for 4Q 2023, the Private Residential Property Price Index grew at a slower pace of 6.7% in 2023, compared to 8.6% in 2022.

Similarly, HDB resale prices rose by 4.8%, less than half of the 10.4% increase recorded in 2022. The proportion of resale flat buyers paying Cash-Over-Valuation (COV) also fell significantly in 2023, halving to nearly 15% in 4Q 2023 from 30% in 4Q 2022. As a result, the vast majority of HDB resale buyers did not need to pay COV.

Transaction volumes and price growth are expected to continue moderating in 2024, impacting both existing and prospective homebuyers, and we should be prepared for external headwinds over the coming years.

Geopolitical uncertainties continue to weigh on the global economy, and Singapore will not be immune.

Domestic mortgage rates currently range between 3.7% and 4.4%, and are expected to remain elevated for an extended period. This will affect existing homeowners, prospective buyers, as well as highly leveraged and debt-laden companies.

Following the record high of nearly 43,000 new homes completed in 2023, around 28,000 units are expected to be completed this year, with another 24,000 units in 2025. Between 2023 and 2025, just under 100,000 public and private residential units will be completed.

Consequently, property prices are unlikely to sustain the momentum seen over the past three years and are expected to stabilise gradually.