Private home prices in Singapore hit all-time high despite cooling measures

OrangeTee analyst predicts up to 22,500 private homes to be sold in 2023 with growth in prices at 5% to 8%.

Prices of private homes in Singapore have shot up to an all-time high despite a second consecutive quarter of sales decline, new information from corporate real estate firm OrangeTee showed.

Speaking to Christine Sun, senior vice president for research and analytics at OrangeTee, Real Estate Asia found that the soaring prices are due to the launching of new projects, which saw more new homes sold at higher prices.

Sun said they have seen prices increasing across city fringes and even in luxury or prime locations. “Many of these individual sellers could have raised their asking prices, because of the rising cost of living or because they feel that with prices of homes rising, so the replacement costs is actually quite high,” she explained.

OrangeTee data showed that new home sales made up 33% of the market share, an increase from 19% in the first quarter of 2022. There was also an increase in private homes sold for over $2m (US$1.5m), with 26 units of them sold above $50m (US37.3m).

Sun noted that whilst interest rates have been high in recent months, there are silver linings ahead as the rate hikes have slowed down.

“Based on what the Fed has indicated, it seems that interest rates may peak around the first half of this year, and the interest rate may even slow down or they may even pause the rate of increase in the coming months,” she said.

This stabilisation could bring more buyers back to the market, she added.
 
Looking ahead, Sun is predicting that 19,000 to 22,500 private homes, excluding executive condominiums, could be sold this year with prices growing at a slightly slower pace of between 5% and 8%.

Noting how cooling measures put in place by the government last September had targeted the Housing and Development Board (HDB) resale market, she said the first quarter of 2023 transactions in the HDB resale market increased by only 1%.

Sun explained that the cooling measures were aimed to limit borrowing by tightening the lower lending limits for housing loans and to moderate demand.

Meanwhile, the lower prices and growth in the HDB resale market could be attributed to fewer big flats being transacted last quarter, she said.

“This could be a reason why prices may have increased at a slower pace. So this could also be because there’s, you know, reduced affordability, mainly because of rising costs of living,” she reiterated.

During the recent budget, in February, the government put in place new policies to provide additional Central Provident Fund (CPF) Housing brands for first-timers who wish to buy resale flats.

“So with this change, we expect more of these first-timers to enter the market in the coming months, especially from the second half of this year particularly for smaller flats,” the OrangeTee executive said.

In this regard, Sun forecasts around 23,000 to 26,000 resale flats to be transacted in 2023, with prices increasing at a slightly slower pace of 5% to 8%.