Analysis of the Singapore Property Market in 2023

Surprisingly, Singapore’s residential property prices continue to rise strongly, despite falling demand. In the first quarter of 2023, the private residential property index increased by 11.44% as compared to a year earlier, following y-o-y rises of 8.64% in Q4 2022, 13.61% in Q3, 10.64% in Q2 and 7.77% in Q1, according to figures released by the Urban Redevelopment Authority (URA). When adjusted for inflation, prices were up by 5.59% y-o-y in Q1 2023.

Singapore’s house price annual change

During the latest quarter (i.e. q-o-q in Q1 2023), residential property prices increased by a modest 3.29% (1.99% inflation-adjusted).

By region:

• In Core Central Region (CCR), prices of non-landed private residential properties rose by 5.77% (0.22% inflation-adjusted) in Q1 2023 from a year earlier, following y-o-y increases of 4.98% in Q4 2022, 6.88% in Q3, 3.98% in Q2 and 3.2% in Q1, according to URA. Quarter-on-quarter, prices increased slightly by 0.83% (but declined 0.44% when adjusted for inflation) during the latest quarter.
• In the Rest of Central Region (RCR), property prices soared by a huge 17.72% (11.54% inflation-adjusted) in Q1 2023 from the previous year – one of the highest y-o-y growth seen in recent history. Quarter-on-quarter, prices rose by 4.39% (3.09% inflation-adjusted) in Q1 2023.
• In Outside Central Region (OCR), property prices rose by 8.92% (3.2% inflation-adjusted) during the year to Q1 2023, following y-o-y increases of 9.59% in Q4 2022, 18.58% in Q3, 10.21% in Q2 and 9.97% in Q1. During the latest quarter, prices increased by 1.88% (0.6% inflation-adjusted).

 Residential property prices in Singapore rose by a cumulative 37.5% (22.2% inflation-adjusted) from 2016 to 2022, after falling by about 8% (7% inflation-adjusted in the three years prior.

Though demand is now falling rapidly, amidst the introduction of new rounds of market-cooling measures. During 2022, total home sales, which include new sales, sub-sales, and resales, plunged by 34.8% year-on-year to 21,890 units, in sharp contrast to a huge 60.5% increase in 2021, according to URA figures. The weakness of the market continued this year, with total home sales dropping by a huge 22.9% to 4,121 units in Q1 2023 as compared to a year earlier. Demand is expected to continue falling during the remainder of the year.

In Q1 2023, there were 1,312 uncompleted private residential units launched in Singapore, more than double the 613 units launched in Q1 2022 but only about a third of the 3,716 units launched two years ago.

Singapore’s economy grew by a modest 3.6% during 2022, following a 7.6% expansion in 2021 and a 4.1% contraction in 2020, according to the Ministry of Trade and Industry (MTI), buoyed by strong growth in construction, services, and wholesale and retail trade. Yet uncertainty remains high due to persistent inflation, disruptions from Russia’s invasion of Ukraine, and the global economic slowdown. In Q1 2023, Singapore registered a meager economic growth of just 0.4% as compared to a year ago, its lowest increase since a contraction in Q4 2020. The MTI expects the overall economy to grow by 0.5% to 2.5% this year. 

Prices of newly-launched developments

Prices in newly launched residential developments in 2023 (based on Savills Q3 2022, Q4 2022, and Q1 2023 reports):

In Core Central Region (CCR):

• In the Hill House, located at Institution Hill, prices of residential units ranged from SG$2,783 (US$2,058) to SG$3,168 (US$2,343) per sq. ft.
• In the Enchante, at Evelyn Road, residential units are sold for SG$2,647 (US$1,958) to SG$2,703 (US$1,999) per sq. ft.

 In the Rest of the Central Region (RCR):

• In Terra Hill, located at the Yew Siang Road, residential units are priced from SG$2,233 (US$1,651) to SG$2,922 (US$2,161) per sq. ft.

In the Outside Central Region (OCR):

• In Sceneca Residence, at Tanah Merah Kechil Link, prices of residential units ranged from SG$1,926 (US$1,424) to SG$2,374 (US$1,756) per sq. ft.
• In The Botany at Dairy Farm, situated on the Dairy Farm Walk, residential units are priced from SG$1,712 (US$1,266) to SG$2,297 (US$1,699) per sq. ft.
• In Pollen Collection, located in the Pollen View, residential units are sold for SG$1,407 (US$1,041) to SG$2,191 (US$1,620) per sq. ft.
• In Kovan Jewel, located at Kovan Road, prices of residential units ranged from SG$2,063 (US$1,526) to SG$2,200 (US$1,627) per sq. ft.
• In AMO Residence, on Ang Mo Kio Rise, residential units are priced from SG$1,890 (US$1,398) to SG$2,406 (US$1,779) per sq. ft.
• In Lentor Modern, located in Lentor Central, prices of residential units ranged from SG$1,837 (US$1,359) to SG$2,513 (US$1,858) per sq. ft.
• In Sky Eden, in Bedok Central, residential units are sold for SG$1,854 (US$1,371) to SG$2,286 (US$1,691) per sq. ft.

New rounds of property curbs

In September 2022, the Singaporean government introduced new rounds of market-cooling measures to restrain property demand and encourage prudent borrowing. These include the following:

• The medium-term interest rate floor used to compute the total debt servicing ratio (TDSR) and mortgage servicing ratio (MSR) was raised by 0.5 percentage points for property loans granted by private financial institutions;
• An interest rate floor of 3% for Housing and Development Board (HDB) loan eligibility letter applications from September 30, 2022, was introduced; and,
• The loan-to-value (LTV) limit for HDB housing loans was lowered further from 85% to 80% of the flat value (after it was lowered from 90% to 85% in December 2021), effectively lowering the amount that home buyers can borrow;
• A 15-month wait period for current and former owners of private residential property to purchase a non-subsidized HDB resale flat was imposed from September 30, 2022, onwards.

These measures came after previous curbs in December 2021 raised additional buyer’s stamp duty (ABSD) rates for nearly all types of buyers.

In an expected move to restrain speculative buying and restrain house price increases, the government introduced another round of measures in April 2023, raising the ABSD rates further to “promote a sustainable property market and prioritize housing for owner-occupation,” said the Monetary Authority of Singapore (MAS), Ministry of Finance (MOF), and Ministry of National Development (MND) in a joint statement.

“Demand from locals purchasing homes for owner-occupation has been especially strong, and there has also been renewed interest from local and foreign investors in our residential property market,” said the authorities. “If left unchecked, prices could run ahead of economic fundamentals, with the risk of a sustained increase in prices relative to incomes.”

For Singaporean citizens, in April 2023 the ABSD rate was raised from 17% to 20% for those buying their second residential property, and from 25% to 30% for those buying their third and subsequent properties.

For permanent residents (PRs), the additional buyer’s stamp duty (ABSD) for second residential property purchases will rise from 25% to 30% and from 30% to 35% for third and subsequent property purchases.

Foreigners buying any residential property will now pay an ABSD flat rate of 60%, double the prior rate of 30%. For entities buying any residential property, the ABSD rate was also raised from 35% to 65%.

ADDITIONAL BUYER’S STAMP DUTY RATES
		Rates from Jul 6, 2018, to Dec. 15, 2021	Rates from Dec. 16, 2021, to Apr. 26, 2023	New rates from Apr. 27, 2023
Singaporeans	Buying 1st residential property	0%	0%	0%
	Buying 2nd residential property	12%	17%	20%
	Buying 3rd and subsequent residential property	15%	25%	30%
Permanent Residents	Buying 1st residential property	5%	5%	5%
	Buying 2nd residential property	15%	25%	30%
	Buying 3rd and subsequent residential property	15%	30%	35%
Foreigners	Buying any residential property	20%	30%	60%
Entities	Buying any residential property	25%	35%	65%
Housing Developers	Buying any residential property	25% + non-remittable 5%	35% + non-remittable 5%	35% + non-remittable 5%
Sources: Dentons Rodyk & Davidson LLP, MOF, MND, MAS, Global Property Guide

Singapore government firmly restrains property prices

The moderation of house prices over the past years is the result of deliberate government policy.

Before and after the global economic crisis, Singapore’s property market surged. The residential property price index rose 38.2% during the space of only one year to Q2 2010 (34% inflation-adjusted).

The Singapore government sensibly took steps, and when these turned out to be not enough, took further measures.

In October 2012 it limited the mortgage term to 35 years and lowered loan-to-value (LTV) ratios to 60% for loans longer than 30 years (or loans stretching beyond age 65).

This was only the first of 10 rounds of property-market cooling measures.

Seller’s stamp duty (SSD) was then introduced on owner-occupied housing sold within a year of purchase. A little later, the stamp duty was revised upwards, with sales of owner-occupied houses taxed sold within a year of acquisition taxed at 16% of the sale price. Then the holding period was increased from one year to four years. In subsequent rounds, LTV ratios were lowered and the minimum cash down payment increased.

Despite these measures, property prices kept surging. In the sixth round, new residential loans were capped at 35 years, with existing loans over 35 years facing tighter LTV ratios. In the seventh round, the government revised the additional buyer’s stamp duty (ABSD), increasing rates from 5% to 7% for Permanent Residents (PRs) first residential property purchase, and Singaporeans’ second residential purchase.

This resulted in a 23.5% decline in sales transactions within a year, but prices continued to surge till the end of 2013.

Eighth, ninth, and tenth rounds of market-cooling measures followed.

These market-cooling measures have been effective, as evidenced by the 10% decline in property prices from 2014 to 2017.

After partially relaxing its market-cooling measures in March 2017, the Singaporean government reversed gear after 2017 sales reached 25,010 units, up 52.7% y-o-y - the biggest increase since 2009, according to URA.

From July 6, 2018, the ABSD rates were raised by 5% for all homebuyers and by 10% for entities, except for Singaporean citizens (SCs) and permanent residents (PRs) purchasing their first residential property. An additional ABSD of 5% was also introduced for developers buying residential properties for housing development.

The government also tightened loan-to-value (LTV) limits on residential property loans from 80% to 75%.

Also, the government raised the stamp duty on home purchases with a value exceeding SG$ 1 million (US$ 737,517) from 3% to 4% in February 2018.

These property curbs have successfully restrained the market in recent years.

Residential property sales plunging

Demand is now falling sharply, amidst the introduction of new rounds of market-cooling measures. During 2022, total home sales, which include new sales, sub-sales and resales, plunged by 34.8% year-on-year to 21,890 units, in sharp contrast to a huge 60.5% increase in 2021, according to URA figures. The weakness of the market continued this year, with total home sales dropping by a huge 22.9% to 4,121 units in Q1 2023 as compared to a year earlier.

In Q1 2023:

• Uncompleted private residential property sales fell by 34.4% y-o-y to 1,163 units.
• Completed private residential property sales rose by 82.4% y-o-y to 93 units.
• Sub-sales skyrocketed by 72.3% y-o-y to 243 units.
• Re-sales were down by 22.4% y-o-y to 2,622 units.

By region:

• In Core Central Region, property sales rose by 21.1% to 1,091 units in Q1 2023 from a year earlier.
• In the Rest of the Central Region, sales plummeted by 40.3% y-o-y to 1,092 units in Q1 2023.
• In Outside Central Region, sales dropped by 25.8% y-o-y to 1,938 units over the same period.

Residential construction activity showed mixed results

In Q1 2023, there were 1,312 uncompleted private residential units launched in Singapore, up 160.3% from the previous quarter and by 114% from a year earlier, according to URA. This was a noticeable improvement from the 57% decline in the total number of uncompleted private residential units launched during the whole year of 2022.

Yet there are wide regional variations:

• In CCR, launches were almost unchanged at 146 units in Q1 2023 from a year earlier, based on figures from URA.
• In RCR, launches rose by 81.5% to 510 units in Q1 2023 from the same period last year.
• In OCR, launches rose sharply by 250.8% y-o-y to 656 units in Q1 2023.

The total supply in the pipeline with planning approvals stood at 44,846 units in Q1 2023, down by 2.6% from the previous quarter and by 5.4% from the same period last year. Of which, 16,252 units are still available in the market, compared to 14,087 units in a year earlier.

• Private residential units under construction fell by 16.4% y-o-y to 34,809 units in Q1 2023. Quarter-on-quarter, they declined 2.3%.
• Planned development rose strongly by 74.2% to 10,037 units in Q1 2023 from a year ago but declined by a modest 3.7% from the previous quarter.

MAJOR PRIVATE RESIDENTIAL PROJECTS LAUNCHED, Q1 2023
Project	Location	Developer	No. of Units	Price Range (SGD per sq. ft.)
Sceneca Residence	Tanah Merah Kechil Link, OCR	MCC Land (TMK) Pte Ltd	268	1,926 – 2,374
Gems Ville	Lorong 13 Geylang, RCR	East Asia Geylang Development Pte Ltd	24	-
Terra Hill	Yew Siang Road, RCR	Hoi Hup Sunway Kent Ridge Pte Ltd	270	2,233 – 2,922
The Botany at Dairy Farm	Dairy Farm Walk, OCR	Sim Lian JV (Dairy Farm) Pte Ltd	386	1,712 – 2,297
Sources: Savills, URA

There were a total of 394,062 housing units available in Singapore in Q1 2023, up by 0.7% from the previous quarter and by 2.9% from a year earlier, according to URA. Of which 370,438 units are occupied, while the remaining 23,624 units are available, making up a vacancy rate of 6%, up from 5.5% in the previous quarter.

 Mortgage loan growth decelerating fast

Outstanding housing loans rose by a minuscule 1.5% in May 2023 from the same period last year to SG$222.2 billion (US$164.3 billion), following annual growth of 3.6% in 2022 and 6.7% in 2021, based on figures from the MAS.

About three-fourths of the outstanding housing loans are for owner-occupied properties while the remaining are for investment properties.

As a percent of GDP, the size of the mortgage market actually contracted to an equivalent of 34.6% in 2022, down from 37.7% of GDP in 2021 and 41.9% of GDP in 2020.

Variable interest rate mortgages dominate Singapore’s housing market. Tweaking the rate on mortgages, plus government restrictions on land use and ownership, has helped pre-empt a housing boom despite sharply lower interest rates over the past decade.