SINGAPORE - There were more signs of price stabilisation in Singapore’s private residential market in the fourth quarter, as buyers turned cautious in the face of higher interest rates, recent cooling measures and macroeconomic uncertainty.

In the leasing market, quarterly rentals fell for the first time in three years, easing across all submarkets as the number of private housing units completed hit 21,284 in 2023 – more than twice the number of completions in 2022 and the highest in a year since 2016.

The Urban Redevelopment Authority’s (URA) overall private home price index rose 2.8 per cent quarter on quarter in the fourth quarter of 2023, above the 2.7 per cent increase in flash estimates released earlier in January.

In the third quarter of 2023, prices had risen by 0.8 per cent.

Analysts cited record-high prices achieved by two new major launches in November – J’den in Jurong East sold 323 units at an average price of $2,451 per sq foot (psf), while Watten House in Bukit Timah moved 102 units at an average price of $3,230 psf.

For the whole of 2023, prices of private residential properties rose 6.8 per cent, moderating from an 8.6 per cent increase in 2022.

This was due in part to a rebound in landed property prices by 4.6 per cent in the fourth quarter, reversing a 3.6 per cent drop in the previous quarter.

Cumulatively, landed home prices gained 8 per cent for 2023 – the sixth straight year of price growth – compared with a 9.6 per cent increase in 2022.

For the non-landed residential market, prices rose by 6.6 per cent in 2023, moderating from a growth of 8.1 per cent in the previous year.

But there are signs of growing price resistance as overall resale volumes fell 2.4 per cent to 2,831 units in the fourth quarter from 2,900 units in the third quarter, and new condominium sales shrank even as developers launched more units in 2023.

Developers sold 1,092 units in the fourth quarter, a 44 per cent drop from 1,946 units moved in the third quarter, taking the total to 6,421 units in 2023.

This is a 9.6 per cent drop from 7,099 units sold in 2022 – the lowest annual tally in 15 years, since 4,264 units were sold in 2008.

The drop occurred despite developers launching about 67 per cent more stock in 2023 with 7,551 new units, compared with 4,528 units in 2022.

With up to 40 new projects potentially offering around 12,000 units in the pipeline for 2024, more buyers may stay on the sidelines as they evaluate options and wait for prices to moderate further, Colliers Singapore’s head of research Catherine He said.

“Mixed-use projects and well-located projects near amenities might still do well, but projects without a compelling proposition might struggle to get decent take-up of at least 50 per cent,” she added.

Prices of non-landed properties increased by 2.3 per cent in the fourth quarter, driven by price growth in the prime district and suburbs.

Prices in the prime district gained 3.9 per cent quarter on quarter, reversing a 2.7 per cent drop in the previous quarter.

But this submarket, which garnered greater interest from foreigners in the past, gained just 1.9 per cent for the whole of 2023 due to cooling measures in April – substantially slower than the 4.8 per cent gain in 2022.

The additional buyer’s stamp duty (ABSD) rate for foreign buyers was doubled to 60 per cent in April 2023.

Mogul.sg chief research officer Nicholas Mak said the proportion of private homes bought by this group will likely remain lower than 3 per cent of overall sales transactions if the 60 per cent ABSD rate stays in place.

Singaporeans will continue to be the main source of home-buying demand, he added.

Mr Mak noted, however, that demand from Singaporeans alone may not keep pace with the sizeable launch pipeline in 2024. This could result in slower absorption of the new housing supply, especially in the high-end market segment, he said.

Non-landed residential prices in the suburbs jumped by 4.5 per cent in the fourth quarter, after a 5.5 per cent growth in the third quarter, fuelled by sales of J’den and Hillock Green units.

In 2023, suburban home prices posted a robust 13.7 per cent gain, up from 9.3 per cent growth in 2022.

In the city fringe, a lack of fresh project launches in the fourth quarter sent non-landed prices down 0.8 per cent, compared with a 2.1 per cent gain in the previous quarter, according to PropNex.

In 2023, prices in this submarket rose 3.1 per cent, compared with a 9.7 per cent gain in 2022. 

URA’s overall rental index for private homes fell 2.1 per cent in the fourth quarter against a 0.8 per cent rise in the previous quarter, signalling that the rental market has peaked.

For the whole of 2023, rentals of private residential properties increased by 8.7 per cent, a significant moderation from the 29.7 per cent jump in 2022. Analysts expect rentals to moderate further as another 18,500 units will be completed between 2024 and 2025. 

Ms Chia Siew Chuin, JLL’s head of residential research for Singapore, noted that leasing contract volume also fell 9.9 per cent in the fourth quarter from a year ago, partly because of a drop in the number of foreign expatriates entering Singapore for work as businesses turned cautious in hiring.

Islandwide, private residential vacancy rates fell to 8.1 per cent in the fourth quarter as rising competition pushed landlords to lower rental rates, Cushman’s head of research for Singapore and South-east Asia Wong Xian Yang said.

A broad-based decline in rents was recorded across all non-landed residential segments, with the suburbs seeing the steepest fall of 2.8 per cent quarter on quarter, followed by a 1.6 per cent drop in the prime district and a 1.2 per cent decline in the city fringe.