New home sales in Singapore have declined for the second consecutive month, signaling a significant slowdown in the previously booming residential market. According to the Urban Redevelopment Authority (URA), developers only sold 221 units in May, down from 301 units in April. This marks a significant 79% decline compared to the same period last year. The decrease in sales underscores the challenges currently being experienced by the market, affecting both property buyers and owners.
Impact of high interest rates and Singapore’s government measures
The significant slowdown in the residential market can be attributed to high interest rates and government cooling measures aimed at controlling property prices and ensuring affordability. These factors have dampened demand, making it more difficult for potential buyers to afford new homes. As a result, property buyers are approaching purchases more cautiously due to higher borrowing costs and stricter regulations that make it less attractive to enter the market. Property owners, on the other hand, may experience longer selling times and potentially receive lower offers as the buyer pool shrinks.
Realtor Knight Frank has updated its forecast for new home sales in 2024, now predicting that fewer than 7,000 units will be sold, down from an earlier estimate of up to 9,000 units. This change is due to the current interest rate environment and strict government policies impacting the market. For investors and buyers, this updated forecast indicates a slower market with fewer opportunities for new acquisitions. It also suggests that the market may take longer to recover, impacting property values and investment returns.
Continued high property prices while new project launches are halted
Despite a decrease in transactions, private home values in Singapore have continued to rise. Prices have increased for three straight quarters, showing resilience in the high-end property segment. Noteworthy transactions are still occurring, such as the SGD 47.3 million ($34.97 million) purchase of an apartment at Skywaters Residences by a foreign buyer. This trend indicates that although overall sales are down, there remains strong interest in luxury properties. For property owners, this means that holding onto high-value assets could still yield significant returns, even in a slowing market.
Developers are being careful about starting new projects due to the current market conditions. In May, only 248 new private homes were put up for sale, a significant drop from almost 1,600 units a year earlier. This cautiousness reflects concerns about how quickly properties are being sold and the impact of regulatory measures on sales performance. For potential property buyers, this could mean fewer options and possibly higher prices for available units as the supply remains limited. Developers’ careful approach also suggests that the market might need some time to stabilize before new project launches increase again.
Implications for foreign investors
For individuals from other countries interested in investing in Singapore’s real estate, the current market conditions offer both challenges and opportunities. The decrease in new-home sales and the cautious approach by developers could result in a more stable market with less competition. However, high interest rates and government measures designed to stabilize the market may create obstacles to financing and investment. It’s crucial for foreign investors to conduct thorough due diligence and stay updated about market trends and regulatory changes. Despite the slowdown, Singapore’s real estate market remains attractive due to its potential for long-term growth and resilience, especially in the luxury segment where high-value transactions continue to take place.
