Why? Singapore's housing price growth slows down

Singapore house prices rose for the fourth consecutive quarter, but the pace of increases has slowed.

According to a report released by the Urban Redevelopment Authority of Singapore on the 1st, the private residential property price index rose by 1.1% month-on-month in the second quarter of 2024, lower than 1.4% in the previous quarter and lower than 2.8% in the fourth quarter of last year.

According to the 2024 Global Wealth and Lifestyle Report released by Julius Baer Group at the end of June, Singapore has become the third most expensive city in the world for private housing. The report said that due to high demand for land and limited supply, Singapore's real estate prices are about 70% higher than the global average.

To prevent house prices from rising too quickly, the Singapore government has implemented a number of measures to manage the housing market. For example, the additional buyer's stamp duty policy introduced in April 2023 will increase the tax rate for foreigners buying any residential property in Singapore from 30% to 60%, and the tax rate for entities and trusts buying houses from 35% to 65%.

Ansari, co-founder and CEO of Juwai IQI Group, a global real estate technology company headquartered in Kuala Lumpur, told Yicai Global that Singapore's private home prices will continue to slow down this year until the Federal Reserve cuts interest rates. "Foreign buyers have always regarded Singapore's property market as a safe haven, which was the biggest driving force for Singapore's property market, but now the 60% tax has made them turn to other countries, such as Dubai and Japan," he said.

Singapore's real estate market consists of public housing and private housing. The former are built and managed by the Singapore government's Housing Development Board and are relatively cheap; the latter include private apartments, condominiums and independent houses, which are built by private developers.

Over the past decade, the occupancy rate of public housing in Singapore has been on a downward trend. According to data from the Singapore Statistics Bureau, about 81.6% of residents lived in public housing in 2012, a proportion that dropped to 79.0% in 2017, 77.9% in 2022, and another 0.2 percentage points in 2023. According to a survey of 1,000 Singaporean youth aged 18 to 35 conducted last year, 8 out of 10 youths said that owning a private property was one of their life goals.

According to URA data, the median price of private apartments in Singapore exceeded S$1.7 million in June, up more than 30% from four years ago. Data released by HDB on July 1 showed that the resale market price of public housing, where Singaporeans mainly live, has risen for the 17th consecutive quarter.

Ansari said: "The growth rate of private home prices in Singapore continued to slow down in the second quarter, while the sales of government-subsidized public housing increased in both volume and price, indicating that buyers are turning to public housing. This also reflects the conservative mentality of Singaporean buyers against the backdrop of high interest rates, high inflation and international instability."

According to reports, in recent years, the Singapore government has increased land sales to promote the construction of private housing. However, due to government restrictions and increased supply, developers' interest in bidding for land has weakened, and recently some plots have even received no bids, which is the first time in more than 20 years.

Liu Minhao, executive partner of Singapore real estate agency SRI Pte Ltd, told China Business News: "The Singapore property market this year is different from previous years. During the epidemic, everyone came to Singapore to buy houses and settle down, and the projects of various developers in those years were almost sold out. What is special about this year is that there are not many new real estate projects launched, which is why the sales performance in the second quarter was average."

But Liu Minhao believes that this does not mean that Singapore's housing market will stop from now on. "In the fourth quarter of this year and early next year, Singapore developers will launch several large real estate projects. For example, IOI, a large Malaysian multinational company we represent, has planned to launch a high-end residential project W Hotel Apartments in the Marina District in the core area of ​​Singapore at the end of this year or early next year, targeting high-income people who are local and have moved here in recent years."

Liu Minhao said that although the Singapore government has introduced an expensive additional buyer's stamp duty policy, high net worth individuals can still afford the expenses of a small apartment. "People holding passports of several countries that have free trade agreements with Singapore can actually be exempted from the high additional tax."

According to the Julius Baer report, Singapore has been ranked as the most expensive city in the world for the second consecutive year. In addition to real estate, Singapore is also expensive in other aspects. For example, due to strict vehicle control measures, Singapore is the most expensive city in the world to buy a car, with prices 155% higher than the global average, private medical prices are 213% higher than the global average, and the cost of high-end dining is also significantly higher than the global average.

However, the report believes that Singapore's appeal to global high-net-worth individuals remains strong due to its robust regulatory environment and geopolitical neutrality amid global tensions.

Liu Minhao gave an example: "In Singapore's core waterfront area, the average housing price of The Sail, a luxury apartment project launched in the area in 2004, was S$800 per square foot. This year, the price of Skywaters Residences, which was newly launched here, is already S$6,100. In short, Singapore's position as a safe haven in the region remains solid."

Ansari also revealed: "Agents have reported that some foreign buyers are still optimistic about Singapore. They are eyeing industrial properties, data centers and warehouses, which are not subject to additional taxes and have relatively stable returns."

According to a report released by real estate services provider Savills, rents for Grade A offices, retail markets, industrial facilities and private residences in Singapore's central business district will continue to rise.

For example, industrial rents in Singapore are expected to continue to rise due to strong demand for modern high-specification warehouses and industrial parks, coupled with insufficient supply in the coming years. However, residential land will remain a major focus as developers have sold all their launched projects in the past three years, showing strong demand for land.

According to the second quarter global economic outlook released by KPMG on the 1st, Singapore's GDP growth rate so far this year is 1% to 3%, and it is expected to continue at this growth rate for the rest of the year, which is also in line with the Singapore government's expectations.