Figures are based off the official flash estimates for HDB/URA quarterly statistics, released on 1 Oct 2024.

Continuing the trend of moderate price growth for resale flats, the latest HDB flash estimates indicate a modest uptick in prices for 3Q 2024, with the Resale Price Index (RPI) rising to 192.6. Quarter-on-quarter (q-o-q), this represents an increase of 2.5% over 2Q 2024.

Similarly, the volume of resale HDB flat transactions reached 8,035 units in 3Q 2024. This is 20% higher compared to the same period last year, which saw 6,695 transactions.

Some 311 million-dollar flats were transacted in 3Q 2024. This makes up merely 3.9% of the 8,035 resale transactions.

Despite the robust growth in transaction volume, prices for most resale flats remained affordable, with 77.0% of HDB resale transactions under the $750k mark.

This increase in transaction volume is due to a confluence of factors including unsuccessful applicants from June Build-To-Order (BTO), homebuyers looking for centrally located flats without new restrictions, and weaker buyers’ sentiment in the private market.

Some HDB upgraders are being priced out of private homes in 3Q 2024. Looking at non-landed private home caveats, purchasers with HDB addresses fell to 28.8%. This contrasts with 37.2% and 33.8% recorded in 2Q 2024 and 1Q 2024 respectively.

The lower number of condo upgraders likely means that these homebuyers defaulted to the HDB market instead, driving transactions and therefore prices. This homebuyer group has the capital and are willing to purchase million-dollar flats, leading to the rise in transactions.

The above statistics on the HDB resale market largely reflect the market conditions prior to the lowering of the Loan-to-Value limit for HDB loans from 80% to 75% on 20 August 2024 to cool the resale market and encourage greater prudence among home buyers.

Revised GDP Forecast and Rate Cuts Offer Hope, But Rising Retrenchments Weigh on Buyer Confidence

According to the Monetary Authority of Singapore (MAS), private sector economists have revised their gross domestic product (GDP) growth forecast for 2024 from 2.4% to 2.6%. Paired with the Federal Reserve’s latest rate cut and other positive economic indicators, this could renew homebuyers’ sentiment.  Furthermore, the overall unemployment rate remained low at 2.7% in the first half of 2024.

But more concerningly, the number of retrenchments has been steadily increasing since Q4 2022, with retrenched citizens taking longer to return to work. These factors combined could lead to more cautious buyer sentiment.

HDB Resale Price Index (RPI) and Transaction Volume

The HDB RPI exhibited stable growth, rising by 2.5% q-o-q to 192.6 in 3Q 2024; this marks the highest growth observed since 3Q 2022. The price index also saw an uptick of 7.9% year-on-year (y-o-y).

Based on resale flat transactions, the volume of HDB transactions saw continued growth for the third consecutive quarter.

The 8,035 transactions recorded in 3Q 2024 is a 9.3% increase q-o-q from 7,352 transactions in 2Q 2024, and a 20% increase y-o-y from 6,695 transactions in 3Q 2023. This is also the highest number of transactions recorded in a quarter since 3Q 2021.

Chart 1: HDB Resale Index vs Number of Transactions

Source: HDB, ERA Research and Market Intelligence as of 1 October 2024
*Based on flash estimates

This increase in transactions could be a result of homebuyers who were unsuccessful in their June Build-To-Order (BTO) application turning to the resale market instead.

Over the years, the HDB market has consistently bucked the trend of lower transaction volumes associated with the Hungry Ghost Festival. With younger Singaporeans becoming less superstitious and less influenced by such beliefs, more of them have been purchasing resale HDB homes during this period, driving up transaction numbers.

Secondly, as the reclassification of BTO flats kicks in, entailing resale restrictions might discourage and deter homebuyers from purchasing a BTO flat, instead driving them to the resale market.

Next, weaker buyer sentiment has led to fewer private home upgrades in 3Q 2024. Looking at non-landed home caveats, purchasers with HDB addresses fell to 28.8%. This contrasts with the 37.2% and 33.8% recorded in 2Q 2024 and 1Q 2024 respectively.

More than half of HDB transactions were below $750k

Chart 2: HDB Transactions by Price Ranges

Source: data.gov.sg as of 30 Sep 2024, ERA Research and Market Intelligence

Some 53% of the HDB resale transactions in 3Q 2024 fell between $500k and $750k, a comfortable price range for most Singapore homebuyers. Another 24% fell between $250k and $500k.

Million-dollar flats

Some 311 million-dollars flats were transacted in 3Q 2024. This makes up merely 3.9% of the 8,035 resale transactions.

Chart 3: HDB Flat Transactions over $1m

Source: HDB as of 26 September 2024, ERA Research and Market Intelligence
*Based on flash estimates

With fewer HDB flats meeting the Minimum Occupation Period (MOP) in 2024, demand for MOP flats in prime locations have skyrocketed, resulting in the continued rise in the number of million-dollar flats.

Furthermore, BTO projects in mature estates no longer offer 5-room and larger flats. As such, we have observed more 4-room million-dollar flats transacted in the quarter. These 4-room flats appeal to homebuyers looking for larger, more centrally located homes.

Who are purchasing these million-dollar flats?

HDB upgraders who might have traditionally opted to purchase a private condominium have opened their options to purchasing these larger, newer and centrally located million-dollar flats. With the rising prices of private homes, they see the value proposition and are willing to pay for these cream-of-the-crop resale flats.

In addition to this, there are also private property sellers emerging from the 15-month wait-out period with the capital to fund these million-dollar HDB purchases.

October BTO launch set to draw some buyers away from the resale market

The final BTO launch of 2024 will take place in October. This launch will constitute 14 new projects, consisting of 8,500 units. This will be the first BTO launch to include the new classification of Standard, Plus, and Prime flats, providing a wider range of housing options, including flats in attractive locations.

As the new Plus flats, along with Prime flats would have more stringent resale restrictions such as a longer MOP, resale income ceiling, and subsidy clawback upon resale.

These resale restrictions might discourage and deter homebuyers from purchasing a BTO flat, instead driving them to the resale market, particularly in prime and choicer locations, such as in mature estates, central Singapore or near MRT stations.

Conclusion

The HDB resale market experienced a surge in transaction volume that continues to drive price growth, albeit at a moderate pace.

The growth in transaction numbers can be attributed to a lower number of HDB homeowners upgrading to a private property in the quarter, due to a variety of reasons.

With private homes becoming increasingly expensive, HDB upgraders and private home downgraders are instead turning to the HDB resale market. This also extends towards larger and higher value HDB flats with strong locational attributes.

The lower number of condo upgraders likely means that these homebuyers defaulted towards the HDB market instead, driving transactions and therefore, prices. This homebuyer group also likely has the capital to purchase million-dollar flats, leading to the rise in transactions.

But with the re-classification of BTO flats, we can expect some buyers to turn to the HDB resale market in efforts to avoid the more stringent resale conditions.

Going forward, we can still expect strong demand and competitive prices for larger flats, such as 5-room and Executive flats, as the upcoming Plus and Prime BTO flats do not include 5-room or larger layouts.

Performance of the resale market should stay accurate to ERA’s 2024 forecast of 6-9% growth in prices, with 29,000 to 30,000 resale flats expected to move.

Disclaimer

This information is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided. Copyright in this publication is owned by ERA and this publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval. 

The Federal Reserve (Fed) has finally cut interest rates after keeping them elevated over a prolonged period.

On 18 September 2024, the Fed announced a cut of 50 basis points (bps), lowering its target interest rate range to 4.75% to 5.00%. This marks a decrease from the previous range of 5.25% to 5.50%, the highest in 23 years.

Notably, this is the first rate cut following a series of hikes that began in 2022, which were implemented to combat rapidly rising inflation. This long-awaited decision will impact lending rates by commercial banks, thereby reducing borrowing costs for consumers and business operators alike across various financial products – from mortgages to credit loans.

Market analysts predict further interest rate cuts by end-2024, with an additional 50 bps expected to be shaved off. In addition, a further rate cuts are expected to be announced in 2025. Should these reductions materialise, this will bring the federal funds target range down to 3.25% to 3.50% by the end of 2025.

Hence, if you’re keen on committing to your first (or next) home purchase, these changes could mean lower local interest rates are on the cards. Plus, here’s a breakdown of three key developments you can expect:

 

1. Lower interest rates could be on the horizon as the Singapore Overnight Average (SORA) is historically influenced by FED interest rate cuts

Source: Fed, MAS, ERA Research and Market Intelligence

In 2019, as  Fed cut interest rates to address a slowing economy, the 3-Month Compounded SORA (3M SORA), which is used as a benchmark for Singapore home loans, also moved in tandem, dropping from 1.5% in October 2019 to levels below the 1% mark This near-zero low persisted till Q2 2022.

Since March 2023, the Federal Reserve has implemented a series of consecutive rate hikes. These increases continued until July 2023 and have remained consistently high since then. Back home, the 3M SORA took on a similar trajectory.

Given the recent FED rate cut, we could see the 3M SORA taking on a similar direction. Going forward, Fed will continue to base future rate cut decisions on data-driven analysis and implement a measured approach. With that, we can expect a gradual and measured pace of decline in interest rates in the future.

 

2. For those on a home loan with a floating mortgage rate, your monthly instalment could be lower over the next few months

Table 1: Interest Rates and The Corresponding Monthly Instalment

Interest Rate (%)	Monthly Instalment ($1mil loan quantum)	Monthly Instalment ($2mil loan quantum)
3.00%	$4,742	$9,484
2.75%	$4,613	$9,226
2.50%	$4,486	$8,972
2.25%	$4,361	$8,723
2.00%	$4,239	$8,477

Source: ERA Research and Market Intelligence, based on 25-year loan tenure

 

Given the strong likelihood of local interest rates tracking Fed movements, homeowners with existing floating rate mortgages have good reason to expect favourable news. A corresponding fall in the 3M SORA would offer a silver lining in the clouds, as borrowing costs fall for them.

As it stands, reports in Singapore also confirm that local banks have already “priced in” the effects of the Fed’s latest rate cut. So, should borrowers refinance at this point?

The answer: perhaps. Homeowners should most certainly explore their refinancing options, and in the medium, a floating rate package could be more attractive given the potential rate cuts ahead.

 

3. The MAS stress test interest rate, used to assess the loan quantum, remains unchanged for now

By using the stress test interest rate, the Monetary Authority of Singapore (MAS) determines how much borrowers can safely borrow for mortgage loans. This measure helps prevent over-leveraging and ensures that borrowers can comfortably handle their monthly repayments in times of elevated interest rates.

Or, put simply, the stress test rate sets an upper limit for loan amounts.

MAS last raised the stress test rate from 3.5% to 4% in September 2022, but some banks are using already using a higher stress test rates of 4.5%. And although there has been no official word regarding a review yet, a potential decrease will allow qualified borrowers to secure a larger loan quantum.

Table 2: Max Property Price Based on Stress Test Rates and Monthly Household Income

Source: ERA Research and Market Intelligence, based on 30-year loan tenure and 55% TDSR and 75% LTV
Loan quantum has been rounded to the nearest thousands.

To help you understand what all this means to you, let’s take a look at a case study.

Mr and Mrs Tan who earn a monthly household income of $15k is looking to buy their new home.

1. Loan quantum based on stress test rate

 

Based on a stress test rate of 4.2%, the maximum property price they can afford is $1.53 mil for a $2.25 mil property.

But should the stress test rate fall to 3.5%, they can afford to buy a higher loan of up to $1.65 mil for a $2.45 mil property

After Mr and Mrs Tan have secure their loan quantum, let’s see how the interest rates impact their monthly instalments.

2. Monthly instalment based on interest rate

 

Assuming a loan of $1.53 mil for a $2.25mil property, Mr and Mrs Tan will be paying up to $6,451 in monthly instalment at an interest rate of 3.00%.

Should interest rates fall to around 2.25% over the next few months, the monthly instalment will correspondingly reduce to $5,858 per month.

Table 3: Interest Rates and he corresponding Monthly Instalment

Source: ERA Research and Market Intelligence, based on 25-year loan tenure

In closing

In any event, additional Fed rate cuts, whether now or in the future, could bolster market sentiment down the line, while also paving the way for more housing market activity in 2025.

As a potential homebuyer, you may be wondering if now is the right time to enter the market. We expect any decrease will be on a marginal basis Given the current trend of moderating interest rates, you might also be weighing the advantages of investing in a new property with a strong track record.

Given the competitive nature of the banking industry, we can expect banks to follow each other’s lead in adjusting their interest rates. Now is a good time for those looking to refinance their loans, as you can expect more attractive loan packages to become available.

While some may opt to wait for clearer market trends before making a move, we believe that 2024 could usher in favourable opportunities. If you’ve been planning to invest in one of the many new launches currently available, now could be the perfect time to make a move.

 

Disclaimer

This information is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided. Copyright in this publication is owned by ERA and this publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval. 

August saw 208 new private homes sold, including seven landed units from the Pollen Collection. This figure represents a 63.6% month-on-month (m-o-m) decline, marking the lowest number of new private home sales since February 2024, when 149 units were sold. The steep decline can be attributed to the absence of new project launches during the Hungry Ghost Month, as well as the high sales base in July 2024. Year-on-year (y-o-y), sales of new private homes were down by 43.6%.

Also, due to tight supply of new Executive Condominiums (EC), only 36 units were moved in the month.

The Hungry Ghost festival has historically led to dampened developer activity as well. Consequently, only 272 units were launched across five existing projects this August.

Best Performing New Launches

Table 1: Top five performing new launch projects (excluding EC)

Name	Market segment	Total units	Number of units sold	Median price ($psf)
TEMBUSU GRAND	RCR	638	30	$2,455
HILLOCK GREEN	OCR	474	17	$2,108
LENTORIA	OCR	267	15	$2,217
HILLHAVEN	OCR	341	14	$2,153
LENTOR HILLS RESIDENCES	OCR	598	13	$2,148

Source: URA as of 17 Sep 2024, ERA Research and Market Intelligence, ERApro

The top five best-selling projects in August are all within a 10-minute walk from an MRT station, reflecting buyers’ preferences of living near MRT stations for easy accessibility.

Tembusu Grand was the best-selling project for August, moving another 30 units at a median price of $2,455 psf. We observed a resurgence of buyer interest in the area, following the opening of the Thomson-East Coast Line (TEL), as well as upcoming launches such as Meyer Blue and Emerald of Katong. The opening of the TEL line could have also boosted interest among potential buyers concerned about the area’s connectivity.

Three of the top five best performing developments were located in the Lentor Hills Estate, demonstrating its popularity among new homebuyers. Hillock Green (17 units), Lentoria (15 units) and Lentor Hills Residences (13 units) sold below the islandwide median new sale price of $2,238psf in August.

Looking ahead, we anticipate buyers gravitating towards homes located in new residential precincts, which like Lentor Hills estate, are within walking distance to neighbourhood amenities and an MRT station.

Additionally, these interested buyers may prefer to purchase now rather than waiting and risking being priced out of the market when the supply of new private homes in Lentor Hills dries up.

With a median price psf of just $2,148, Hillhaven also proved to be a value buy for homebuyers looking for a unit in the West. The development’s unit mix caters to most families’ needs, and it is within walking distance of Hillview MRT and Rail Mall. The combination of these elements presents a strong value proposition to buyers.

Executive Condominium

In the EC segment, sales of new homes remained stable for August at 36 units, clocking in the same number sold in July. North Gaia was the best-performing project, with 24 units moved at a median price of $1,306 psf.

Though the EC market is poised for an injection of fresh stock with the anticipated launch of Novo Place (508 units) in 4Q 2024, sales are likely to remain tepid until then.

In the meantime, EC buyers have the option to choose from available units across North Gaia (62 units), Altura (19 units) and Lumina Grand (101 units).

Buyer Profile

New private home demand from foreign buyers continued to remain low in August, with just five transactions made. On the other hand, the number of new private homes bought by Singapore Permanent Residents (SPRs) fell to 18 units in August, down from last month’s 64 units.

Chart 1: Buyer profile for all new non-landed homes excluding ECs 

Luxury Properties (Non-landed Homes $5 mil and above)

A total of six luxury homes, priced at $5M and above, were transacted in August 2024. The highest-priced transaction was a 4,198 sqft unit at 32 Gilstead, which was purchased for $14.7 million ($3,505 psf) by a Singapore Permanent Resident (SPR).

Chart 2: Buyer profile for all new non-landed homes excluding ECs transacted at $5mil and more

Source: URA as of 12 Sep 2024, ERA Research and Market Intelligence

What can we expect in the last four months of 2024?

While August’s performance was underwhelming compared to July’s strong showing, we should see an increase in new sale transactions in September.

The launch of 8@BT, a 158-unit development near Beauty World MRT Station alongside impending interest rate cuts could spark homebuying activities towards the end of the year.

The coming months will also see the launch of more new projects. There are 13 new private developments in the pipeline, potentially yielding a total of 6,204 units. This includes several mega-developments in popular heartland areas such as Parktown Residence (1,195 units) in Tampines, The Chuan Park (916 units) in Serangoon, Emerald of Katong (846 units) in the East Coast area.

Even with the improved economic growth sentiment, the projected rate cuts and a lower inflation forecast, buyers could remain cautiously optimistic. Current cooling measures are still in effect and are likely to put a dent in the pace of recovery.

While the first eight months of 2024 saw just 2,628 new units moved, compared to 5,333 in the same period in 2023, we may still see a rebound in new sale transactions by the end of the year, provided they are launched at the right time and with competitive pricing.

ERA forecasts that 5,500 to 6,500 new private homes will be sold by end-2024. We also expect new home price growth to reach between 4% to 6% y-o-y by the end of 2024.

Disclaimer

This information is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided. Copyright in this publication is owned by ERA and this publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval. 

The Ministry of Development (MND) and Housing Development Board (HDB) have jointly announced a set of cooling measures for the HDB resale market and additional grants to provide further support to lower-to-middle income first-time home buyers.

Adjustment of Loan-To-Value limit for HDB loans

With effect from 20 August 2024, the Loan-to-Value (LTV) limit for HDB loans will be lowered from 80% to 75%, akin to mortgage loans granted by financial institutions. The revised HDB LTV limit will apply to complete resale applications received by HDB on or after 20 August 2024. A complete resale application is one where HDB has received both the sellers’ and buyers’ portions of the application.

Additional Enhanced CPF Housing Grants (EHG) for lower income families and singles

Separately, to provide more support to lower-to-middle income first-time home buyers, the Government will increase the Enhanced CPF Housing Grant (EHG) quantum for new and resale flats to support first-time home buyers. The EHG will be increased by up to $40,000 for eligible first-timer families, from the current maximum grant amount of $80,000, up to $120,000. Additionally, EHG for eligible first-timer singles will increase by up to $20,000, from the current maximum grant amount of $40,000 to $60,000.

 

This is the fourth cooling measure targeted at the HDB market since 2021. The first cooling measure was in December 2021, where LTV for HDB loan was lowered from 90% to 85%. The LTV limit was subsequently reduced to 80% in September 2022.

 

Date	Cooling Measure
December 2021	LTV lowered from 90% to 85%
September 2022	LTV lowered from 85% to 80% Private property owners will have to wait for 15 months after selling their property before they can buy a non-subsidised HDB resale flat.
August 2024	LTV lowered from 80% to 75%

Possible factors behind the cooling measure implementation

The lower LTV has been put in place as a direct measure to cool the HDB resale market. Here are three key metrics behind the implementation of today’s cooling measure.

Between 2Q 2020 (start of pandemic) and today, the HDB Resale Price Index (RPI) rose a staggering 42.5%. The number of resale applications have also trended upwards, reporting a 4.0% growth quarter-on-quarter (q-o-q) and 12.9% year-on-year (y-o-y) growth.

Chart 1: HDB RPI and Resale Applications

Source: HDB, ERA Research and Market Intelligence

The most crucial metric would be the number of million-dollar flats resold. In 2020, the market saw only 82 of such flats. But in just first seven months of 2024, we have seen 539 million-dollar flats in the market. Among which, 13 of these transactions were at least $1.5 mil or higher.

The September 2022 cooling measure requires private property owners to wait-out for 15 months after selling their property before they can buy a non-subsidised HDB resale flat. Between 3Q 2022 and 4Q 2023, the resale market saw an average of 112 million-dollar flat transactions each quarter.

By 1Q 2024, coinciding with the first batch of private property owners completing their 15-month wait-out period, the number of million-dollar flat transactions surged to 183, followed by 236 transactions in 2Q 2024.

Chart 2: Million-dollar HDB flats

Source: data.gov.sg as at 20 Aug 2024, ERA Research and Market Intelligence

How will the lower LTV affect homebuyers?

With a lower LTV in place, today’s buyers are expected to fork out a higher deposit. To illustrate, we have provided the following scenarios to help buyers understand the implications of lower LTV.

In both Example 1 and 2, the buyers have combined CPF savings of $150,000, which will require no cash top up for the deposit when buying a 4-room flat. But if they decide to buy a 5-room flat, they will need to top up $20,000 in cash to meet the shortfall in deposit. In the case of these examples, the cash outlay is reasonably manageable by most buyers today.

Example 1: Buying a 4-room HDB flat with sufficient CPF to cover the excess deposit

Source: ERA Research and Market Intelligence

Example 2: Buying a 5-room HDB flat with insufficient CPF to cover the excess deposit

Source: ERA Research and Market Intelligence

However, looking at the example below illustrates a possible cash outlay that many buyers of such million-dollar flats are facing.

Example 3: Buying a million-dollar 5-room HDB flat with insufficient CPF to cover the excess deposit

Source: ERA Research and Market Intelligence

Many of these buyers already need to pay a high Cash-Over-Valuation (COV) amount and may need to provide even more cash if they don’t have sufficient CPF funds to cover the higher deposit.

Which buyers are affected by this LTV change?

We do not expect this change to affect a large proportion of HDB resale buyers since many of them are financially prudent. But there could be a small group of buyers who may be affected by this change.

1. Buyers who have little CPF funds will have to fork out more cash going forward.
2. Buyers who may have little cash and CPF and are relying on the valuation to reduce their cash outlay.

EHG to increase, offering support to first-time homebuyers

For the eligible Singaporeans, the EHG will be revised to provide additional support for lower-to-middle income households buying new or resale flats. The maximum EHG for First-Timer Families and Singles, depending on monthly household income, will offer them greater help in managing the higher deposit required with the lower LTV limit.

Comparing the current and revised EHG, the lower band of household income will see a significant increase in grants. For First-Timer families that earn less than $5,000 per month, the revised grants will amount to between 40% and 50% more than before. This will provide substantial supports to lower-to-middle income households looking to buy their first home.

 Chart 3: Enhanced Housing Grants for Eligible First-Timer Families

Source: MND, ERA Research and Market Intelligence

Chart 4: Housing Grants for Eligible First-Timer Singles

Source: MND, ERA Research and Market Intelligence

ERA’s closing comments

Through the implementation of this new cooling measure, it is apparent that the Government recognises financing as an important factor in managing financial prudence among homebuyers.

By lowering the LTV for loans granted by the HDB (which are cheaper at 2.6% compared to bank loan rates), it may indirectly compel buyers to be more conservative when making their offers to purchase HDB resale flats. This may result in a stabilisation of HDB resale prices in the long run.

We are in full support of the Government’s ongoing dedication to ensuring HDB flats stay affordable for Singaporeans. The latest policy tweaks reflect a strong commitment to ensuring that citizens of all demographics have access to affordable housing, which is integral to upholding the social fabric of Singapore.

 

Disclaimer

This information is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided. Copyright in this publication is owned by ERA and this publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval. 

Sales of new homes picked up steam in July 2024, more than doubling month-on-month (m-o-m) from June’s 228 units to 571 units (excluding Executive Condominiums).

Another 37 units of Executive Condominium were sold in the same month.

The upswing in sales numbers comes on the back of two top performing new launches that made their debut in July, namely Kassia (276 units) and SORA (440 units).

With Kassia and SORA selling 154 and 103 units respectively, these top performers collectively made up 45% of July 2024’s new home sales, further shoring up the Outside Central Region’s (OCR) dominance in the residential primary market.

Although July’s performance for new home sales is the strongest by far since April 2024, it still marks a substantial drop year-on-year compared to the 1,412 units sold in July 2023.  This July saw fewer project launches compared to last year, which featured larger developments like Grand Dunman (1,008 units), Lentor Hills Residences (598 units), Pinetree Hill (520 units), and The Myst (408 units).

Separately, July also marks the first time in 2024 that new home transactions of $1M and below were recorded. A majority of the one-bedroom units from Kassia fell within this price range, making it an attractive entry price for investors looking for a freehold unit.

Best Performing New Launches

Table 1: Top five performing new launch projects (excluding EC) 

Name	Market segment	Total units	Number of units sold	Median price ($psf)
KASSIA	OCR	276	154	$2,049
SORA	OCR	440	103	$2,152
THE LAKEGARDEN RESIDENCES	OCR	306	41	$2,212
HILLHAVEN	OCR	341	29	$2,088
GRAND DUNMAN	RCR	1,008	24	$2,583

Source: URA as of 15 Aug 2024, ERA Research and Market Intelligence

Kassia clinched the top spot in July’s new home sales, moving 154 of its 276 units (56% sold) at a median price of $2,049 per square foot. This strong performance cements Kassia’s position as the second best-selling launch of 2024. Kassia’s solid performance is built on the backbone of its freehold status, as well as a competitive price point.

The next top performer, SORA (440 units) saw 101 units transacted at a median price of $2,152 psf. Notably, the bulk of units moved during SORA’s weekend comprised of one-bedders with a study, which had starting prices of $996,000 – as well as two-bedders, priced upwards from $1.3M. SORA’s debut has also given the area a fresh injection of smaller new private homes, specifically 1- and 2-bedders, which have mostly sold out at neighbouring The LakeGarden Residences.

With 41 units moved at a median price of $2,212 psf, The LakeGarden Residences ranks third among July’s best-selling projects. This is a continuation of the project’s strong showing in June, having placed first with 23 units sold at $2,119 psf during an otherwise tepid month. With the launch of Sora, The LakeGarden Residences moved another 25 of the 3-bedroom and larger units as some buyers who were waiting to compare the prices and layouts between the projects, have finally committed to a purchase.

Executive Condominiums

In the EC segment, sales of new homes remained stable for July, clocking in at 37 units sold.

Among existing EC projects that saw new sales activity, the top performers were North Gaia and Lumina Grand. A total of 26 units of North Gaia were transacted at a median price of $1,319 psf, and another 11 units were moved for a median price of $1,492 psf at Lumina Grand.

Though presently subdued, the EC market is poised for an injection of fresh stock with the anticipated launch of Novo Place (508 units), jointly developed by Hoi Hup Realty and Sunway Developments, in 4Q 2024.

Buyer Profile

New home demand from foreign buyers dipped even further in July as 2023’s cooling measures continue to take their toll on sales numbers. The number of Singapore PR buyers (69 units) more than doubled m-o-m and is the highest seen last November.

Based on data from URA Realis, foreign buyers lodged only six caveats in July, a further decline from the 11 registered the previous month. Among these, one was for a property priced between $1M and $1.5M, four were for properties priced between $2M and $2.5M, and one was for a property priced between $3.5M and $4M.

Chart 1: Buyer profile for all new non-landed homes excluding ECs 

Source: URA, ERA Research and Market Intelligence

Luxury Properties (Non-landed Homes $5 mil and above)

A total of two luxury homes, priced at $5M and above, were transacted in July 2024. Both deals were from Midtown Modern.

Chart 2: Buyer profile for homes transacted at $5mil and more

Source: URA, ERA Research and Market Intelligence

What can we expect in 2H 2024?

Despite July’s performance giving 2H 2024 a strong kick-off, the market for new homes is expected to remain tepid in August in view of the Hungry Ghost Festival (4 August to 2 September). Typically, this period is characterised by a slower market with fewer launches.

Highly anticipated launches projected to launch such as Meyer Blue (226 units), Emerald of Katong (846 units), and The Chuan Park (916 units) could drive new home sales later in 2H 2024. Collectively, the new launches scheduled for 3Q 2024 will introduce an estimated total of 2,512 units. Alongside a further 4,200 units scheduled for 4Q 2024, this should significantly surpass the 2,495 units launched in 1H 2024.

Despite probable rate cuts in Sept, we do not anticipate a swift market rebound. While Singapore’s economy is expected to stay resilient, downside risks remain. Therefore, we expect homebuyers to remain cautiously optimistic under today’s climate.

In view of these factors, ERA forecasts that 5,500 to 6,500 new private homes will be sold by end-2024. We also expect new home price growth to reach between 4% to 6% y-o-y by the end of 2024, given the prevailing cautious economic mood.

 

Disclaimer

This information is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided. Copyright in this publication is owned by ERA and this publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval. 

The results are in! Recently concluded on 23 July 2024, ERA Singapore’s inaugural ‘My Dream Home’ survey uncovers a treasure trove of insights about the homebuying preferences, residential needs, housing budgets, and property aspirations of Singaporeans of all ages.

The survey, which was conducted in partnership with Ngee Ann Polytechnic, drew key insights from the responses of 1,737 participants. We were able to take the pulse of Singapore’s dynamic property market from the perspective of four generational cohorts: Gen Z (21 – 27 years old), Millennials (28 – 43 years old), Gen X (44 – 59 years old), as well as Baby Boomer and Seniors (60 years old and above).

Download our comprehensive 22-page report – and discover what constitutes a dream home for local property buyers!

Key Insights

Gen Z targets BTO and HDB resale flats as first homes, has upgrading aspirations

85% of Gen Z respondents indicated homeownership as “important” or “very important”. This is further underscored by the fact that 35% have plans to purchase a property within the next three to five years.

With their budding careers and earning capacities, only 24% of Gen Z currently own their homes. 23% of Gen Z will buy resale HDBs while 59% of Gen Z look to a BTO flat for their first property purchase.

59% of Gen Z aspires to upgrade to a new private condominium in the next three to five years, with the North-East as the most popular location. This is likely due to the affordability of homes in this region. Conversely, Gen Z respondents seeking an HDB flat primarily favoured the East, with approximately 24% indicating it as their top choice.

When considering housing budgets, Gen Z respondents displayed distinct preferences. Among those interested in buying a private condominium, over half (55%) indicated they have a budget of between $1M–2M. In comparison, 61% of Gen Z respondents keen on buying HDB flats have a budget ranging between $500K-$1M.

One-third of millennials aspire to buy a condo, but will balance affordability with size to meet their housing needs

Within the total survey cohort of millennials, a large majority (77%) reported satisfaction with their present housing arrangements. A healthy 35% of the total millennial cohort expressed aspirations of moving into a private condo. Most millennial condo seekers (54%) target a price range of

$1M- $2M for their next property, a substantial segment (20%) are ready to invest between $2M-$3M.

Another 45% of millennials indicated interest in purchasing an HDB flat. 62% are willing to spend between $500K-$1M, a healthy budget for the vast majority of HDB resale flats. Based on HDB resale transactions in 1H 2024, 97% of the flats transacted were below $1M.

Additionally, millennials did not express a strong preference for either new or resale condos. Instead, their property purchasing decisions are strongly influenced by their housing needs, such as affordability and size.

This inclination may be traced back to millennials’ longer career trajectories, providing them with a longer horizon for wealth accumulation compared to older generations. Additionally, the absence of immediate retirement financial pressures grants millennials more flexibility with their housing budgets.

Gen Xers are the most satisfied with their housing situation, focused on buying a new private condo in the future

Similar to their millennial counterparts, Gen Xers showed the most interest in purchasing private condos and HDB flats for their future homes, while also demonstrating relatively equal disposition towards these property types.

Of the Gen Xers surveyed, 37% indicated an interest in purchasing a private condo. Within this segment of Gen Xers, most respondents (54%) indicated that they had a preferred budget of $1M-$2M for a future private condo and 18% of Gen Xers are comfortable with a budget range of $2M-$3M.

Among Gen Xers looking to buy a private condo, an overwhelmingly 64% of them prefer new condominiums, far surpassing other generational cohorts. This preference likely stems from the appeal of greater potential for capital appreciation – qualities that align well with the long-term financial goals of Gen Xers.

As early entrants into Singapore’s property market, Gen Xers have benefitted from price appreciations during past market booms, and they strongly believe that properties are sound investment vehicles.

Even so, roughly 44% of all Gen X respondents expressed interest in purchasing an HDB flat for their future residence. Notably, even though the bulk of Gen Xers (51%) belonging to this subgroup indicated that they had a budget of $500K-$1M in mind, a substantial number of them (46%) showed a preference for a more conservative budget of under $500K.

The conservative budget of under $500K could indicate their intent to move to smaller flats. In 1H 2024, 32% of resale transactions were transacted under S$500K and well distributed island-wide.

Boomer and seniors are satisfied with their current homes, have strong desire to right-size and leave a legacy

Although 78% of boomer and senior respondents reported being “satisfied” or “very satisfied” with their current residences, there remains substantial interest in continuing their property journey, with 54% of this demographic expressing intentions to purchase another property.

This interest may be driven by a desire to right-size, given that 33% of the above demographic consists of two-person households, the highest percentage among all age groups. Supporting this notion, the large majority of all boomer and senior respondents (70%) indicated that their future property purchase is intended for their own stay.

By right-sizing, older Singaporeans can avoid getting caught in a financial pincer, with rising maintenance costs on one end and the need for home accessibility improvements on the other. Moreover, doing so offers the opportunity to unlock retirement funds through the sale of their current home.

The ABSD refund for single seniors aged 55 and above, announced in April 2024, could further motivate this group of buyers to right-size.

Download the full report in PDF

 

Disclaimer

This information is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided. Copyright in this publication is owned by ERA and this publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval. 

 

Private home rental market shows signs of bottoming in 2Q 2024, while the HDB rental market remains resilient.

Private Residential Rental Index 

The private residential properties rental index decreased by 0.8% quarter-on-quarter (q-o-q), reflecting a slower pace of growth compared to the 1.9% seen in the previous quarter. This marked the third consecutive quarter of decline.

The Landed property rental index decreased 0.9% q-o-q while the Non-Landed property rental index decreased by 0.8% q-o-q.

The Non-Landed property rental indexes across all regions saw declines in 2Q 2024. Rents for the Rest of Central Region (RCR) and Outside Central Region (OCR) dipped by 1.4% and 1.3% q-o-q respectively, while the Core Central Region (CCR) saw a less significant contraction of 0.1% q-o-q.

Rentals in the CCR seem to have bottomed out as CCR rents have fallen 4.8% y-o-y while demand remains steady. This has prompted renters who had previously moved outwards to return. Moreover, new expats with high incomes and larger rental budgets are more likely to pay extra to live closer to their workplaces or the city centre.

Also, with lower private property rents, some HDB tenants may find better value in renting a private property unit with on-site facilities and better security. Some HDB renters may capitalise on lower private property rents when their tenancy expires as the rental gap between HDBs and condominiums continues to narrow.

Chart 1: Private Residential Rental Indexes

Source: URA, ERA Research and Market Intelligence

Private Rental Contracts

The total number of private non-landed rental contracts rose 1.9% q-o-q in 2Q 2024 to 19,744 transactions. However, this figure is still 9.9% lower than the 5-year average.

Chart 2: Private Residential Rental Contracts

Source: URA, ERA Research and Market Intelligence

With another 6,975 private non-landed units expected to be completed in the 2H 2024, this could potentially lead to more properties being put up for rent , thus further saturating the rental market.

Furthermore, in a high interest rate environment, some landlords may adopt a more practical strategy of securing tenants even at lower rents to ensure that they can cover their mortgages.

HDB Rental Market

Higher HDB median rents across all towns for 3, 4 and 5-room flats

HDB rents are exhibiting an upwards trend, with median rents across all flat types and towns rising by an average of 1.9% y-o-y. This increase was primarily driven by a 3% increase in rents for 2-room flats. Despite the increase in rents, HDB flats remain the most affordable housing option for prospective tenants.

Amidst inflationary pressures and economic uncertainty, some private property tenants have turned cautious, leading them to consider renting HDB flats. However, these tenants typically have a competitively larger rental budget and are willing to pay slightly higher rents to secure choice units. The limited supply and higher demand for HDB flat rentals have prompted the slight uptick in rents.

Table 3: HDB Median Rents in 2Q 2024

Town	1-Room	2-Room	3-Room	4-Room	5-Room	Executive
ANG MO KIO	–	*	$2,800	$3,400	$3,600	*
BEDOK	–	*	$2,700	$3,300	$3,530	*
BISHAN	–	–	$2,900	$3,500	$3,800	*
BUKIT BATOK	–	$2,480	$2,500	$3,200	$3,500	*
BUKIT MERAH	*	*	$2,970	$3,800	$4,000	–
BUKIT PANJANG	–	*	$2,600	$3,100	$3,300	$3,530
BUKIT TIMAH	–	–	*	*	*	*
CENTRAL	–	*	$3,100	$4,400	*	–
CHOA CHU KANG	*	*	$2,500	$3,100	$3,150	$3,400
CLEMENTI	–	*	$3,000	$3,700	$4,000	*
GEYLANG	–	*	$2,700	$3,300	$3,700	*
HOUGANG	–	*	$2,700	$3,200	$3,350	$3,600
JURONG EAST	–	*	$2,700	$3,300	$3,600	$3,830
JURONG WEST	–	*	$2,500	$3,300	$3,500	$3,600
KALLANG/WHAMPOA	–	*	$2,830	$3,800	$4,100	*
MARINE PARADE	–	–	$2,850	$3,250	*	–
PASIR RIS	–	*	*	$3,200	$3,500	$3,600
PUNGGOL	–	*	$2,930	$3,200	$3,300	*
QUEENSTOWN	–	*	$3,000	$3,800	$4,300	*
SEMBAWANG	–	$2,400	*	$3,150	$3,300	$3,400
SENGKANG	–	$2,300	$2,900	$3,200	$3,300	$3,500
SERANGOON	–	–	$2,600	$3,400	$3,500	*
TAMPINES	–	*	$2,800	$3,300	$3,600	$3,850
TOA PAYOH	–	*	$2,750	$3,500	$4,000	*
WOODLANDS	–	*	$2,400	$3,000	$3,300	$3,450
YISHUN	–	*	$2,630	$3,100	$3,300	$3,500

Source: HDB, ERA Research and Market Intelligence

HDB rental demand holds

Although rents are falling slightly, demand for HDB rentals remains strong. The number of approved applications is 9,554, representing an increase of 1.3% q-o-q, following the 3.6% q-o-q decline in 1Q 2024.

Chart 2: Number of approved applications to rent out HDB flats by flat type

Source: HDB, ERA Research and Market Intelligence

Conclusion

Overall, the moderation in private residential rents has resulted in an increase in the number of rental contracts in 1Q 2024.

Furthermore, with 3,600 private residential units (including ECs) completed in 1H 2024, and approximately 11,300 more units expected to be completed by the end of this year, the market could see further upticks in the number of rent-ready properties. This rise in supply may lead to heightened competition for tenants amongst landlords, possibly softening the rental market further.

With that, ERA predicts a potential easing of private residential rental prices by up to 5% y-o-y in 2024, with the number of rental contracts ranging between 75,000 and 80,000.

When it comes to the HDB rental market, the narrowing gap between HDB and private home rents may encourage some tenants to pay a slight premium for a condominium instead. Nonetheless, the HDB rental market is expected to show resilience due to low inventory, possibly resulting in average rents growing by up to 10% in 2024.

Therefore, ERA forecasts that the number of HDB rental approvals will range between 36,000 to 38,000 contracts in 2024.

Disclaimer

This information is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided. Copyright in this publication is owned by ERA and this publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval. 

June saw muted new home sales with the holidays and lack of new home launches.

June 2024 saw muted new sale demand with no new home launches, registering 228 units (excluding Executive Condominiums (ECs)) sold. This marked a 3.2% increase month-on-month (m-o-m).

In addition to this, another 50 units of ECs were sold.

Excluding ECs, the top five selling projects included four projects in the OCR, with one in the RCR.

Best Performing New Launches

Table 1: Top five performing new launch projects

Name	Market segment	Total units	Number of units sold	Median price ($psf)
The LakeGarden Residences	OCR	306	23	$2,119
The Botany @ Dairy Farm	OCR	386	21	$1,979
Tembusu Grand	RCR	638	20	$2,542
Hillhaven	OCR	341	18	$2,124
Pinetree Hill	OCR	520	15	$2,548

Source: URA as of 15 July 2024

Three of the top five selling launches, namely The Botany at Dairy Farm ($1,979psf), Hillhaven ($2,124psf) and The LakeGarden Residences ($2,124psf) transacted at prices below the island-wide median new sale transaction price of $2,248psf.

Topping the sales chart for June, The LakeGarden Residences saw 23 units sold at a median price of $2,119 psf. Remarkably, this surpasses the 22 units sold from January to May 2024. Prospective buyers were holding off their purchases until after Sora’s preview, before committing to a decision.

In addition to this, 19 of the 23 units sold at The LakeGarden Residences were 75sqm and larger. This indicates a strong demand for larger sized units for buyers, possibly HDB upgraders, looking for their own stay purposes.

Promise of a major development of the large white site in the Jurong Lake District led by a five-party consortium could have given buyers confidence to purchase a property in the JLD, and fuelled demand for new sale homes in the area.

In second place, the Botany at Dairy Farmmoved 21 units at a median price of $1,979 psft . The project has seen a steady demand over the past quarter, which can be largely attributed to its affordable entry price.

Executive Condominiums

June 2024 saw 50 EC units sold, a 25% increase m-o-m from May. As there were no new ECs launched in the month, these sale numbers were made up of existing stock on the market.

Of these units, 29 of them were from the sale of homes for North Gaia at a median price of $1,311psf. Lumina Grand also moved another 16 units at a median price of $1,508psf.

As the next available new EC projects will only hit the market in 2025, buyers are snatching up remaining stock, especially when they are available at an affordable price point.

Buyer Profile

The doubling of Additional Buyer Stamp Duty rates for nforeig buyers since April 2023 continued to curbed foreign buyer interest in Singapore’s residential property market on a large scale.

Only 11 caveats were lodged by foreign buyers in June 2024, and hese transactions took place in the CCR and RCR market segments.

Chart 1: Buyer profile for all new non-landed homes excluding ECs 

Source: URA as of 15 July 2024, ERA Research and Market Intelligence

Luxury Properties (Non-landed Homes $5 mil and above)

Chart 2: Buyer profile for homes transacted at $5mil and more 

Source: URA as of 15 July 2024, ERA Research and Market Intelligence 

In total, seven luxury homes ($5m and above) were transacted in June 2024. All of these transactions took place in the CCR. Of the seven luxury homes sold, four of them were purchased by foreigners, although from unspecified nationalities. The highest transaction was for a 1,808sqft unit at Midtown Modern, which was sold for $6,688,000, at $3,698psf.

What can we expect in 2H 2024?

Based on our observations, homebuying momentum is likely to pick up in 2H 2024 with the upcoming launch of highly anticipated new projects comprising Sora, Kassia, The Chuan Park, and Emerald of Katong.

In the 2H 2024, ERA expects the launch of approximately 17 new home projects, which will introduce around 8,400 new homes.

Factoring a softer labour and with higher-for-longer interest rates, ERA has revised our new home forecast to between 5,500 to 6,500 units by the end-2024, down from the previous forecast 7,000 to 8,000 units. New home price growth is expected to reach between 4% and 6% y-o-y by end-2024.

 

Disclaimer

This information is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided. Copyright in this publication is owned by ERA and this publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval. 

At present, Singapore’s shophouse market marks a departure from past performance, when transaction volumes were notably higher.

As of 10 July 2024, based on lodged caveats, only 36 shophouses changed hands in the first six months of 2024, amounting to a total transaction value of $341.7 m. This is a far cry from the market’s peak in 2021, which witnessed approximately 245 shophouses with a cumulative worth of $1.8 b being sold in a year.

Year-on-year (y-o-y), compared to 1H 2023, 1H 2024’s transaction volume and value moderation has declined by 53.3% and 52.7% on respectively; these results come on the back of a continued slowdown that initially started in 2H 2023, when only 45 shophouse units were transacted.

Preceding this slowdown, prices of shophouses were inflated by transactions made by buyers linked to the $3b money laundering cases, resulting in a frothy market. These buyers were willing to pay above-normal prices, and with their exit from the market, buying momentum slowed.

Presently, most shophouse sellers are not under distress and are in no hurry to sell. Moreover, with the exception of those facing foreclosure or money laundering investigations, most shophouse sellers have benchmarked their asking prices to past years.

Buyers, on the other hand, are waiting on the sidelines till shophouse prices ease to enhance their prospects for future capital appreciation. Additionally, buyers may also be biding their time due to higher-for-longer interest rates, which have exerted downwards pressure on yields.

Consequently, this mismatch in price expectations between shophouse buyers and sellers has led to a standstill in transactions.

Freehold landed shophouse prices rise year-on-year, while 99-year leasehold counterparts see price decline

Chart 1: Transaction volume and transaction value of landed shophouses

Source: URA as of 10 July 2024, ERA Research and Market Intelligence

Of the 36 shophouses transacted in 1H 2024, 86.1% (31 units) were of Freehold (FH), inclusive of shophouses with 999-year leasehold tenure.

Both these types of shophouses represent compelling investment opportunities, owing to their rarity. Furthermore, due to their immunity to lease decay, these properties are able to hold their value over the long term. A greater number of FH shophouses also contributes to price stability, as they are less susceptible to strong volatility.

Average prices of FH shophouses grew 2.0% y-o-y in 1H 2024. In contrast, 99-year leasehold shophouses saw just four transactions over the past half-year, with average prices falling by 76.7% y-o-y.

There have also been some notable deals made by high-profile family office investors and high-net-worth individuals who were willing to pay a premium. With lower sales, these higher value transactions have a more pronounced effect on average prices in the market.

One of the more notable shophouse deal was The Rail Mall, which Paragon REIT divested for $78.5m on 20 June 2024 to a private investor. The property has a remaining lease of 21 years 8 months.

Chart 2: Average PSF prices for landed shophouses

Source: URA as at 10 July 2024, ERA Research and Market Intelligence

Higher proportion of shophouses transacted below price quantum of $5 million

Some 36.1% of landed shophouses transacted in 1H 2024 were sold for under $5m, while another 25.0% of transactions in the same period were made for $10m or more.

While overall transaction values in the market are falling, the limited supply of landed shophouses have kept demand resilient over the years. Being assets that see capital appreciation, this dip in landed shophouse prices may just be a slight blip as the market corrects.

Chart 3: Price quantum of landed shophouse in the last ten years

Source: URA as at 10 July 2024, ERA Research and Market Intelligence

Singapore shophouse: An asset class that captivates foreign investors

The scarcity of landed shophouses, coupled with Singapore’s robust economy, stable political climate, and low tax regime, have led to these properties being coveted by institutional investors and family offices. Oftentimes as vehicles to achieve their clients’ goals of capital appreciation and wealth preservation.

Earlier in February this year, Business Times reported a high-profile landed shophouse deal, said to have been made by the spouse of Alibaba Group co-founder Jack Ma; having purchased three 99LH shophouses on Duxton Road with balance terms of 63 years.

The deal, which was understood to be worth a combined total of between $45 – $50m, will see the purchased units converted into mixed-use developments with ground-floor restaurants and upper-floor office spaces. The properties were originally acquired by their previous owner for a combined value of $22.2m in 2018.

Popularity of Central Region shophouses

Among the 36 shophouses sold in 1H 2024, 33 were located in the Central Region – an area popular for eateries, fitness studios and co-living spaces. As such, owners of Central Region landed shophouses will likely be able to command higher rents on their properties.

District 8 was the most popular area for landed shophouse buyers, making up half (18 units) of the total transactions in 1H 2024. There could also be opportunities for value buys present in District 8, as seven of these transactions were transacted below $5m.

Chart 4: Top five districts by transactions volume in 1H 2024

Source: URA as at 10 July 2024, ERA Research and Market Intelligence

Table 1: Top five shophouse transactions in 1H 2024

Development	Address	District	Transacted Price ($)	Land Area (sqft)	Unit Price PSF ($)	Transaction Date
The Rail Mall	380, 382, 384 ETC Upper Bukit Timah Road	23	78,500,000	105,563	744	20 Jun 2024
Kreta Ayer Conservation Area	31 Pagoda Street	08	19,000,000	1,310	14,504	13 Mar 2024
Geylang Conservation Area	223,225,227 Geylang Road	08	18,680,000	4,319	4,326	26 Feb 2024
Telok Ayer Conservation Area	182 Telok Ayer Street	01	16,500,000	1,429	11,543	28 May 2024
Kreta Ayer Conservation Area	35 Mosque Street	01	15,930,000	1,202	13,249	6 Mar 2024

Source: URA as at 10 July 2024, ERA Research and Market Intelligence

Shophouse demand expected to remain subdued in 2024

Amid rising prices and softer yields, the demand for landed shophouses is expected to stay soft this year. However, their allure as proven assets that are low in supply may keep investors and institutional funds interested, assuming that interest rates start to come off in the coming months.

However, their allure as proven assets remain owing to their rarity and heterogeneity, as no two shophouses are identical. Furthermore, shophouses are zoned Commercial, they are not subject to Additional Buyer’s Stamp Duty and Seller’s Stamp Duty. Correspondingly, unlike residential properties, commercial shophouses have no restrictions on foreign ownership.

Owing to the abovementioned qualities, shophouses will still hold appeal for foreigners and entities, such as institutional funds, who wish to hold local property in their portfolios. As such, should interest rates come off, we can anticipate a growth in shophouse transaction volumes.

Furthermore, should banks put up more shophouses seized from money laundering cases at lower asking prices, we may witness a correcting effect on the market, subject to transaction outcomes.

Likewise, if the gap between sellers and buyers’ price expectations narrows, we are likely to see more shophouse transactions take place, albeit without any strong fluctuations in prices. Otherwise, a continued stalemate will lead to transaction volumes dwindling further.

Based on these factors, ERA forecasts the landed shophouse transaction volume for 2H 2024 to be between 40 to 50 units. This prediction will take the total transaction volume to between 75 to 85 units for the year. Finally, we project the total transaction value for landed shophouses to range between $800m – $900m for the entirety of 2024.

 

Disclaimer

This information is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided. Copyright in this publication is owned by ERA and this publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval. 

Singapore’s private property market continued to slow down one year after the adjustments to Additional Buyer’s Stamp Duty (ABSD) rates were introduced in April 2023.

Furthermore, buyers have turned cautious and have pushed back their homebuying plans amid strong headwinds from slower economic growth. This has been further compounded by higher-for-longer interest rates and the higher cost of replacement homes.

Residential Home Prices

Based on flash estimates, the All-residential property price index reported a modest quarter-on-quarter (q-o-q) increase of 1.1% in 2Q 2024 compared to the 1.4% increase in 1Q 2024.

Prices of non-landed properties increased by 0.9% in 2Q 2024, compared to an increase of 1.0% in the previous quarter. Prices of non-landed properties in the Core Central Region (CCR) decreased by 0.2%, compared to the 3.4% increase in the previous quarter.

Prices of non-landed properties in the Rest of Central Region and Outside Central Region increased by 2.2% and 0.3% respectively, compared to an increase of 0.3% and 0.2% in the previous quarter respectively.

For landed properties, prices increased at a more gradual pace of 1.8% in 2Q 2024, compared to the 2.6% increase in the previous quarter.

Affordability remains a top concern for homebuyers. Despite rising prices, nearly 4 out of 5 non-landed homes sold in 2Q 2024 were priced below $2.5 million, with many buyers compromising by choosing smaller home sizes in order to keep within this price range.

Overall, 42.6% of the caveats were recorded within the sweet spot price range of between $1.5mil and $2.5mil.

Chart 1: Residential Price Indices

*Based on flash estimates
Source: URA as of 1 July 2024, ERA Research and Market Intelligence

Transaction Volume

According to URA flash estimates, sale transaction volume (up to mid-June) totalled 4,215 in 2Q 2024, compared to 4,230 in 1Q 2024.

Based on caveats lodged, islandwide non-landed private property transactions have dropped to 3,591 units, falling by 8.9% q-o-q and 29.7% y-o-y, the lowest observed since 4Q 2022.

On the back of fewer launches in 2Q 2024, new sale transaction volume fell to its lowest since 4Q 2022. New sale transaction volume fell to just 663 transactions, marking a decline of 41.8% q-o-q and 68.0% y-o-y. This is the lowest seen since 4Q 2022. In 2Q 2024, there were only six new projects launched.

Among which, two of the launches were luxury developments, Skywaters Residences and 32 Gilstead, which sold at a median price of $6,100 psf and $3,455 psf respectively.

Demand in the secondary market fell marginally by 3.7% y-o-y to 2,928 units in 2Q 2024.

Chart 2: All non-landed private residential transactions

Source: URA as of 1 July 2024, ERA Research and Market Intelligence

CCR

Non-landed private home transaction volume in the CCR fell by 41.8% q-o-q and 68.0% y-o-y to 663 units in 2Q 2024.

The CCR market, which typically sees the largest proportion of foreign buyers has remained suppressed due to the increase in ABSD rates for foreigners since last April.

The recent price adjustments at Cuscaden Reserve and The Residences at W Singapore Sentosa Cove have sparked much-needed buyer activity in the CCR market, providing value buys for investors.

RCR/OCR

The total transaction volume in Rest of Central Region (RCR) more than halved in 2Q 2024 compared to 2Q 2023 with just 1,142 transactions. The decline was attributed to fewer new homes launched in 2Q 2024 compared to a year ago.

In the Outside Central Region, the number of transactions rose 13.0% y-o-y to 1,823 in 2Q 2024 compared to 1,613 in 2Q 2023.

The RCR and OCR regions continue to be largely supported by homeowners and HDB upgraders who are attracted to locations with upcoming redevelopment, as well as areas that will see improved connectivity in the long term.

However, these buyers tend to be price sensitive and would typically buy within the sweet spot price quantum.

2H 2024 Government Land Sale (GLS) Programme

To continue to cater to housing demand and maintain market stability, the URA has ten sites on the Confirmed List and nine sites on the Reserve List in the 2H 2024 GLS program.

On the Confirmed List, there are nine residential sites, inclusive of an executive condominium (EC) plot, and a residential and commercial plot. There will be a total supply of 11,110 private residential units created via the Government Land Sales Programme in 2024 – the highest in a single year since 2013.

Outlook

Based on our observations, homebuying momentum is likely to pick up in 2H 2024 with the upcoming launch of highly anticipated new projects comprising SORA, Kassia, The Chuan Park and, Emerald of Katong.

In 2H 2024, ERA anticipates up the launch of approximately 17 new home projects, which will introduce around 8,400 new homes.

Factoring current market conditions, ERA has revised our new home forecast to between 5,500 to 6,500 units by the end-2024, down from the previous forecast 7,000 to 8,000 units. New home price growth is expected to reach between 4% and 6% y-o-y by end-2024.

In terms of the secondary market, ERA expects the CCR to continue seeing subdued demand, while RCR and OCR demand should hold with support from local buyers.

ERA holds our project the secondary market. The total resale and subsale transaction volume could reach between 26,000 and 27,000 units, with price expected to rise by 4% to 5% y-o-y in 2024.

Disclaimer

This information is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided. Copyright in this publication is owned by ERA and this publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval.