Market Trends of Singapore Real Estate Industry
Rise in the Residential Segment of the Singapore Real Estate Market
In contrast to the HDB resale market, the cost of renting an HDB property is rising steadily. In comparison to the total Rental Price Index of 145.22 points, the Rental Price Index for HDB apartments for Q1 2022 is 185.69 points.
The factors driving rental demand are still the same: singles and unmarried couples want their own space and solitude away from their families, and couples affected by a new round of BTO building delays consider renting as a temporary solution.
In 2022, there were 41 new private residential projects, with a total of 5,389 units. Based on the number of units, 22% are in the Core Central Region (CCR), 37% in the Rest of the Central Region (RCR), and 41% in the Outside Central Region (OCR). Along with a number of highly-anticipated projects, such as Gem Residences (located in the RCR) and Stars of Kovan (in OCR) lined up for launch, new sales transaction activity is expected to swing toward the mid-tier and mass-market segments.
Shift in Singapore's Home Loan Landscape Amidst Global Economic Uncertainty
Following the COVID-19 pandemic, the Federal Reserve (Fed) in the US implemented a series of interest rate hikes, impacting Singapore's home loan rates. This trend has persisted since 2022. However, with a waning inflation outlook and a gloomier economic forecast, the Fed has now shifted gears. Projections indicate the possibility of three to six rate cuts between 2024 and 2025, gradually easing Singapore's home loan interest rates.
As these rate cuts are expected to be gradual, their impact may not be immediately evident in the early months of 2024. Consequently, borrowers are likely to reassess their stance on fixed-rate home loans, especially in the latter half of the year.
In 2023, interest rates played a pivotal role in the real estate market of Singapore. While the Fed's rate adjustments were less aggressive than in 2022, they remained elevated throughout the year. By December 2023, the US Fed's interest rates stood between 5.25% and 5.50%. Fears of inflation, potential mortgage rate hikes, and an uncertain economic climate prompted some property seekers to temporarily withdraw from the Singapore market. While the prospect of cheaper home loans is enticing for buyers, investors are cautioned against disregarding Additional Buyer's Stamp Duty (ABSD) rates and reentering the market prematurely. Nonetheless, these rate reductions will likely bring relief to existing landlords, who have been grappling with declining rental rates.
