Moderate Growth in Home Prices in Q3 2023; Hesitant Buying Sentiment Amidst Uncertain Economic Outlook, High Interest Rates, and Impact of Property Cooling Measures

27 October 2023, SINGAPORE – Residential property prices grew at a moderate pace in Q3 2023, as cooling measures continued to bite and stronger buyer hesitancy amidst macroeconomic uncertainties and elevated interest rates. While still resilient, home sales and prices could face some pressure in the near-term given the choppy landscape owing to the ongoing conflict in the Middle East. Market confidence appears to be still holding up and home buyers are expected to remain cautious as geopolitical tensions heighten uncertainties.

Q3 2023 URA Private Residential Property Index
Data from the Urban Redevelopment Authority (URA) showed that overall private home prices inched up by 0.8% QOQ in Q3 2023, overturning the 0.2% QOQ decline in the previous quarter (see Table 1). This takes the cumulative price increase in the first nine months of 2023 to 3.9%, slowing from the 8.2% for the corresponding period in 2022. The final print published today is higher than the flash estimates of a 0.5% QOQ growth announced earlier this month.

The overall price growth in Q3 2023 was mainly driven by the non-landed private homes segment, which has helped to offset the 3.6% QOQ decline in prices of landed homes. This marks the first quarterly decline in landed home prices in nine quarters, since the 0.3% QOQ drop in Q2 2021. Cumulatively, landed home prices rose by 3.2% in the first nine months of 2023 – easing substantially from the 9% growth from in the same period in 2022. The moderation in landed home prices can be attributed to the decline in sales transactions in the Detached House and Semi-detached House segments from Q2 to Q3, according to caveats lodged.

Meanwhile, non-landed private home prices increased by 2.2% QOQ in Q3 2023, rebounding from the 0.6% QOQ decline in the previous quarter. The price growth came about as the Rest of Central Region (RCR) and Outside Central Region (OCR) posted price gains, supported by the launch of several new projects in these sub-markets during the quarter. The RCR sub-market reversed the 2.5% QOQ price decline in Q2 2023, with a 2.1% QOQ increase in Q3 2023 – helped by new launches such as Pinetree Hill, Grand Dunman, and TMW Maxwell in the quarter.

Non-landed home prices also grew in the OCR, rising at a faster pace of 5.5% QOQ in Q3 2023, compared with the 1.2% growth in Q2 2023. There were several OCR launches in the quarter, including Lentor Hills Residences, The Arden, The Lakegarden Residences, and The Myst. According to URA data, developers sold 725 new private homes (ex. EC) in the OCR Q3 2023 – the highest quarterly new sales in the OCR since 1,244 units were sold in Q3 2022.

Over in the Core Central Region (CCR), non-landed private home prices fell by 2.7% in Q3 2023 – the second consecutive quarter of price decline, following the 0.1% QOQ drop in the previous quarter. In 9M 2023, CCR non-landed home prices fell by 2% from the end of 2022, compared with the 4.1% price growth posted in 9M 2022. The price moderation can be attributed to the tightening of the additional buyer’s stamp duty (ABSD) rates from 27 April 2023, which could have a more pronounced impact on the CCR segment, as CCR homes tend to see greater investment interest for foreigners and local investors. There were 253 new CCR private homes sold in Q3 2023, marking the lowest quarterly sales in 11 months, since 204 new units were transacted in the CCR in Q4 2020,

As a whole, URA said new private home sales came in at 1,946 units (ex. EC) in Q3 2023 – down by 8.5% QOQ from 2,127 units in Q2 2023 and lower by 11% year-on-year from Q3 2022. The private residential property resale market also softened slightly in Q3 2023, with 2,900 units resold during the quarter compared with 2,976 units in Q2 2023. Meanwhile, the sub-sales number increased to 355 units in Q3 2023 (representing 6.8% of total sales) from 285 units in Q2 2023. Some possible reasons for the uptick in sub-sales could be owners selling their property to realise capital gains as prices have climbed in the past years; while some owners could also have sold the units due to the elevated financing cost.
In the first nine months of 2023, there were 5,329 new private homes (ex. EC) and 8,498 resale private homes sold – lower than the 6,409 new units and 11,332 resale homes transacted in 9M 2022. As at the end of Q3 2023, the number of uncompleted unsold private homes (ex. EC) stood at 16,747 units, down by 4.2% from 17,484 units in the previous quarter.

Private residential leasing
In the private home leasing market, rentals continued to ease in Q3 2023, rising by 0.8% QOQ – moderating from the 2.8% QOQ increase in the previous quarter. It is the fourth straight moderation in rental growth and the slowest quarterly increase in 11 quarters. This takes the URA private residential properties rental index to a new high, with a reading of 164.5 points. In 9M 2023, the rental index rose by a cumulative 11.1% compared with a 20.8% gain in 9M 2022. The increase in supply completion could have helped to rein in rental growth; a bumper crop of 8,517 private homes were completed in Q3 2023.

Please attribute the comments below to Ismail Gafoor, CEO of PropNex Realty.
“Looking at the URA PPI for Q2 and Q3 2023, it is fair to say that the three rounds of cooling measures since December 2021 have achieved their intended outcome of taking the buzz out of the housing market and to keep prices from becoming out of sync with economic fundamentals. We expect a handful of new launches (including J’den and Hillock Green) to help to support sales and home prices in the fourth quarter. For the whole of 2023, we project that the overall private home price growth could come in at between 4% and 5%. Meanwhile, we have recently revised downwards our sales volume projections to 6,500 to 7,000 units (ex. EC) for new home sales and 12,000 to 13,000 units for resale private residential properties.

One of the key factors that drives property market performance is buyer/investor sentiment. Generally, people tend to feel more comfortable to enter the market when others are doing likewise, but of late, we have seen transaction volumes cooled due to fresh cooling measures in April, macroeconomic uncertainties, and geopolitical tensions. Buyers turn cautious, which leads to a pull-back in sales activity, and this cautious sentiment then feeds on itself and may prompt others to defer their purchase. We reckon some prospective buyers are holding out for market catalysts (such as interest rates stabilisation), or are perhaps strategising on opportunistic buys (including looking at options in the CCR segment).

Based on our observations, we do not anticipate a sharp correction in home prices in the near-term. For developers, it is because they have already locked in their land cost; interest rates and construction costs are still high and the new rules on gross floor area (GFA) definitions will eat into the project’s saleable area. For sellers in the resale market, they could be open to negotiation but may not substantially lower asking price as they need to consider the cost of their replacement home. For 2024, we are expecting private home prices to stay in the positive territory, with a 3% to 4% increase next year.

We note that the median transacted unit price of CCR non-landed new sales has stablised at the around the $2,910 psf level in Q3 2023, while that of RCR and OCR hovered at about $2,510 psf and $2,080 psf respectively (see Table 2). Meanwhile, median unit prices of non-landed resale homes in RCR and OCR rose by 1.4% and 1.0% respectively from Q2 to Q3, while CCR resale prices fell by 4.2% QOQ, according to caveats lodged.

The tightening of the ASBD rates in April 2023 has weighed on foreign investment demand. Private non-landed new and resale home sales (ex. EC) to foreigners (non-PR) fell to 1.8% of the total transactions in Q3 2023 (see Table 3) – the lowest quarterly figure on record since 1995. Over 81% of the sales in Q3 were to Singaporean buyers – whom we expect to continue to account for a lion’s share of home sales going forward.”

Table 3: Non-landed new private home sales and non-landed resales (Ex. EC) by nationality by residential status by Quarter

Nationality by Residential Status2021Q12021Q22021Q32021Q42022Q12022Q22022Q32022Q42023Q12023Q22023Q3
Foreigner (NPR)4.0%3.9%3.2%4.0%3.1%4.9%4.7%7.2%7.2%4.2%1.8%
Singapore Permanent Residents (PR)16.6%16.9%15.0%15.0%18.0%17.1%15.9%20.8%19.9%16.1%16.9%

Source: PropNex Research, URA Realis

Q3 2023 HDB Resale Price Index
The quarterly data released by the Housing and Development Board (HDB) showed that resale prices of public housing flats rose by 1.3% QOQ in Q3 2023, easing slightly from the 1.5% QOQ increase in the previous quarter (see Table 4). This marks the 14th straight QOQ growth in the HDB Resale Price Index. Cumulatively, HDB resale prices have risen by 3.8% in 9M 2023 – slower than the 8% growth in the corresponding period in 2022.

The HDB said that 6,695 resale flats were transacted in Q3 2023 – up by 2.8% QOQ from the 6,514 HDB flats resold in Q2 2023. However, sales underperformed on a year-on-year basis, falling by 11.3% from 7,546 units resold in Q3 2022.

Table 4: HDB Resale Price Index

QuarterQOQ % changeYOY % change
Q1 20213.0%8.1%
Q2 20213.0%11.0%
Q3 20212.9%12.5%
Q4 20213.4%12.7%
Q1 20222.4%12.2%
Q2 20222.8%12.0%
Q3 20222.6%11.6%
Q4 20222.3%10.4%
Q1 20231.0%8.8%
Q2 20231.5%7.5%
Q3 20231.3%6.2%

Source: PropNex Research, HDB

Please attribute the comments below to Wong Siew Ying, Head of Research and Content, PropNex Realty.
“The up-tick in HDB resale flat volume in Q3 2023 has helped to support resale prices during the quarter. Based on transaction data, the price increase in Q3 2023 was driven by 4-room flats, which posted a 1.8% QOQ growth in average transacted price to $590,019; this was followed by executive flats which achieved an average price increase of 1.2% QOQ to $837,138 (see Table 5). In Q3 2023, we also observed that the average resale price in 14 towns (out of a total of 26 towns) had touched new highs across a mix of mature and non-mature estates, according to transaction data.

Meanwhile, there were 128 resale flats that were transacted for at least $1 million in Q3 2023, taking the tally to 336 such flats in the first nine months of the year. Factoring the 35 units of million-dollar flats that changed hands so far in October, there were 371 such flats resold thus far – already exceeding the record 369 units resold in the whole of 2022 with two months to spare.

For the full-year 2023, we expect that HDB resale volume could come at around 26,000 to 27,000 units, amidst price resistance among buyers and potentially some resale demand being funnelled to HDB’s Build-to-Order (BTO) sales exercise, taking place in December 2023. The December BTO launch will offer about 6,000 flats in a wide variety of locations, such as Bukit Panjang, Jurong West, Woodlands, Bedok, Bishan, Bukit Merah and Queenstown. Price-wise, we are maintaining our HDB resale price growth projection at 5% to 6% for 2023, and at 4% to 5% for 2024 – easing from the double-digit price increase witnessed in 2021 and 2022.”

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