Property Market Sentiment Dips into Pessimistic Territory, but Why Does the Residential Market Remain Resilient?

Real Estate Sentiment Dips into Pessimistic Territory: Why Does the Residential Market Remain Resilient?

The latest Real Estate Sentiment Index (RESI) reveals that overall confidence in the property market is cooling down.

According to the latest survey by the Institute of Real Estate and Urban Studies (IREUS) at the National University of Singapore (NUS), overall real estate market sentiment slipped into pessimistic territory in the first quarter of this year. However, a closer look across various sectors reveals clear divergence: the residential market continues to show resilience, while commercial and industrial properties face mounting pressure.

Overall Property Sentiment Drops to Multi-Quarter Low

According to the latest survey, in Q1 of this year: the Current Sentiment Index dropped from 6.1 to 4.9, the Future Sentiment Index fell from 5.5 to 5.0, and the Composite Sentiment Index declined to 4.9—falling below the neutral baseline of 5.0 for the first time.

This indicates that real estate industry professionals have shifted from previous optimism towards a more cautious outlook on the market ahead.

Why Is the Market Turning Conservative?

The survey indicates that the biggest headwinds stem from the global macroeconomic environment.

Notably, 80% of surveyed industry professionals cited inflation and elevated interest rates as the top risks currently facing the property market, a significant increase from the previous quarter.

In addition, market players expressed concerns over: a global economic slowdown, rising construction costs, softer domestic economic growth, and a weakening labour market.

With heightened geopolitical tensions in the Middle East, volatility in energy prices and global economic uncertainty have further dampened market confidence.

Residential Market Continues to Show Resilience

Despite the broader drop in property sentiment, the residential market is far less pessimistic than anticipated.

In particular, mass-market private housing in the Outside Central Region (OCR) remains the most resilient and well-supported segment.

The survey found that, whether evaluating current market performance or the outlook over the next six months, the proportion of industry players bullish on the OCR residential market comfortably outnumbered those who were bearish.

Furthermore, many property developers remain confident about upcoming new launches.

Around half of the surveyed developers expect unit prices of newly launched projects over the next six months to register modest gains, underscoring that genuine market demand remains intact.

Key contributing factors include: stable domestic buyer demand, steady participation from HDB upgraders, relatively limited new launch supply, and interest rates that have eased compared to previous peaks.

These dynamics continue to anchor the performance of the residential sector.

Luxury Segment Sees Momentum Cool

Compared to mass-market homes, optimism in the prime luxury segment has moderated noticeably.

While more respondents still lean positive on luxury properties overall, the proportion of optimists has declined considerably from the previous quarter, reflecting a more cautious stance among investors amid external economic risks.

Commercial and Industrial Segments Bear the Brunt

The most pronounced softness has emerged in commercial real estate.

Sentiment in the office market has shifted from mildly optimistic to neutral.

The retail sector experienced an even sharper reversal, with bears now outnumbering bulls across both suburban malls and prime downtown retail spaces.

Hotels and serviced apartments have likewise felt the impact.

The weakest performers were business parks and high-tech industrial spaces, where the net bearish sentiment widened by 25 percentage points, making it the most subdued asset class in this round of the survey.

Market Shifting into "Defensive Mode"

IREUS highlighted that the real estate market is not entering a recession, but rather transitioning from an expansionary phase into a more prudent "defensive mode".

In the face of external economic uncertainty, businesses and investors are prioritising cash flow, financing costs, and risk management—leaving commercial and industrial real estate to feel the pinch first.

In contrast, the residential market enjoys strong downside support, underpinned primarily by local owner-occupier demand and a tightly managed supply pipeline.

Summary

Rather than signalling a broad-based property downturn, this RESI survey highlights an accelerating divergence across asset classes.

The residential market remains anchored by domestic owner-occupier and upgrader demand, with OCR mass-market condos proving particularly resilient. Commercial and industrial properties, on the other hand, remain far more vulnerable to global economic headwinds, interest rate paths, and corporate capital spending appetites.

For homebuyers, rather than getting distracted by top-line market sentiment, it is far more crucial to evaluate micro-locations, property types, and personal financial readiness. New launches boasting prime locations, seamless MRT connectivity, and comprehensive amenities are set to maintain strong market appeal.

As global economic trends and interest rate directions become clearer, the trajectory of Singapore's property market will remain an important space to watch.