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Business Times
5 days ago
- Business
- Business Times
Increasing affluence continues to fuel housing demand and prices, but economic uncertainty could test market: Knight Frank
[SINGAPORE] Interest rate cuts, growing affluence and low unemployment rates spell good news for Singapore's private residential market, but a cocktail of challenges could test the otherwise resilient sector. At a property market seminar organised by the Real Estate Developers' Association (Redas) on Thursday (Jul 24), Knight Frank research head Leonard Tay noted that geopolitical conflicts and ongoing trade tensions threaten to weigh on private housing sentiment this year. 'On the local front, it is more costly to own or keep a property, not only to buy,' said Tay, pointing to higher property tax, as well as increase in seller's stamp duty period and rates. Still, he reckoned that these may be blips in the market's long history of resilience. Between 1980 and 2024, private home prices in the city-state grew almost eight times with a compounded annual growth rate of 5.1 per cent. This came despite various regional and global downturns since the 1980s, from the Asian Financial Crisis in the late 1990s to the global financial crisis in 2008 and the latest Covid-19 pandemic in 2020. The market's resilience is especially evident in the last eight years, Tay said, with private home prices rising 55.3 per cent even as new cooling measures rolled out, on top of a pandemic and global shutdown. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up Demand and price growth also continues to be fuelled by steadily improving economic affluence, said Tay. In 2024, the level of household liabilities was around 35 per cent of liquid assets – down from over 50 per cent in the 1990s. Household net worth – that is, liquid assets excluding the value of their homes and Central Provident Fund – has been on the rise over the past two decades and now stands at over S$1 trillion, versus under S$600 billion a decade ago. At the same time, the easing of interest rates means more liquidity for Singapore residents – who form the bulk of housing demand – to purchase homes, said Tay. 'This has brought those who are sitting on the sidelines… back in play.' The overall unemployment rate also remains relatively low, not increasing over 3.6 per cent in the past 30 years, providing a sustainable base for most households, he said. 'However, should Singapore slide into a recession that is accompanied by pay cuts, salary freezes and job losses, potential homebuyers will retreat to defensive positions, resulting in a fall in transaction volume,' said Tay. 'In such a scenario, there is every chance the government will provide some fiscal relief in the form of an off-budget stimulus package top prop up the economy, as in the past.' Growing prices vs affordability A separate study published by Knight Frank on the same day showed that although Singapore homes have grown much more expensive over the years, that was not to say that they were much less affordable. In the private housing sector, the study indicated that the median price of new homes was nearly 19 times that of household incomes in 2024, from being 11.8 times higher in 2019. Much of the price increase was due to pent-up demand during the pandemic, against limited supply. This was further compounded by construction delays and a lack of development land sales during the period, which led developers to bid aggressively for land in most of 2021 and 2022, said Knight Frank. Global inflation also meant higher construction costs, and therefore the elevated new home prices between 2021 and 2024, it said. The private resale market, on the other hand, saw a more consistent price-to-income ratio in the past 15 years – from a low of 9.8 in 2016, to a peak of 13.3 in 2012 and 2013. Most recently in 2024, the ratio was 12.1. Resale prices of private homes were also higher vis-a-vis household incomes over a decade ago, compared with 2024, Knight Frank noted. 'This strongly points to… new sales (being) the main cause of overall price growth in the past five years.' The modest changes in the resale market's price-to-income ratio indicates that 'there are possible affordable options in the resale market', it added. 'Nonetheless, holding and cost of property upkeep have increased in the post-pandemic period of inflation,' said the consultancy. 'Increases in property tax might have also led private homeowners to rationalise and right-size their real estate portfolios.' As for public housing, Knight Frank noted that the average resale price-to-income ratio has been steadily rising since 2019, from 3.8 to 4.6 in 2024. Still, when compared to that of non-landed private homes, Housing & Development Board (HDB) homes remain 'much more affordable', it said. 'Even so, HDB resale prices have increased and show signs of continuing to increase, remaining on the path of reaching the high of 5.1 last recorded in 2013.' Knight Frank's survey found housing prices and affordability were the overriding priorities for the vast majority of Singapore residents when buying a home. 'While price growth has slowed and been reined in, housing affordability remains a pressing issue, particularly for younger buyers or those looking to upgrade,' said Knight Frank.
Business Times
5 days ago
- Business
- Business Times
Reits, institutional investors and funds in ‘buy mode' as debt costs ease
[SINGAPORE] Real estate investment trusts (Reits), investors and funds have turned 'more acquisitive' in Singapore this year, even as geopolitical and macroeconomic uncertainties persist. Speaking on Thursday (Jul 24) at the annual property market seminar organised by the Real Estate Developers' Association of Singapore (Redas), CBRE deputy managing director of Singapore advisory and capital markets head Michael Tay noted an overall improvement in buying sentiment across the real estate investment market as interest rates eased. In the year to date, short-term interest rates in Singapore have fallen by 110 basis points, with the 10-year average now standing at 1.3 per cent. At a separate panel discussion during the Redas event, Taimur Baig, DBS chief economist, said: 'Singapore is going through a golden era in terms of capital flows. It is an overwhelming amount of portfolio and foreign direct investment that's coming to Singapore right now.' With almost a trillion dollars of foreign current deposit sitting in Singapore, Baig said: 'All that inflow, all the liquidity, materialised into collapsing the domestic interest rate.' Given the more accretive environment, Tay noted that 'investors are starting to see and feel that it is time to put money back into the Singapore market'. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up Investors are also drawn to the Republic for its safe-haven status and steady yields, even though the market has seen limited repricing, unlike that of South Korea, China and Australia, said Tay. 'Despite tighter yields, Singapore has become a key component for most (institutional investors') portfolios as they balance risks across the portfolio.' Among Asia-Pacific investment markets, Singapore had the third-highest year-on-year growth in H1 2025, behind Japan and South Korea, said Tay. Investment activity in the city-state is up 7 per cent year on year, with private volumes up 20 per cent on the year. Notable deals include Fraser Centrepoint Trust's purchase of the rest of Northpoint City for around S$1.1 billion in March; IOI Properties' acquisition of a 50.1 per cent stake in the mixed-use project South Beach for S$834.2 million in June; and Mapletree Industrial Trust's divestment of three industrial assets for S$535.3 million to Brookfield Asset Management. In April, Bain Capital also acquired Blackstone's Singapore worker dormitory firm Avery Lodge for S$750 million. CBRE's Investors Intentions Survey in January found Reits, institutional investors and funds signalling more acquisitions in 2025. Net buying intentions from Reits measured at 22 per cent, up from minus 13 per cent in the prior year. That of institutional investors rose from 4 to 12 per cent, and property funds from minus 4 per cent to 10 per cent. Meanwhile, private investors were expected to divest more real estate assets, capitalising on improving market sentiment after acquiring them during a period of price dislocation. Developers were expected to be 'net neutral investors' in the year, with higher construction and labour costs weighing on development decisions, said the report. The industrial and office sectors were top preferred asset classes, with interest in office assets expected to pick up marginally this year due to stabilising or improving leasing activity in some markets. The living sector too, received strong interest with a few notable deals closing in the half year. BlackRock and Malaysia's YTL Corp acquired Citadines Raffles Place for S$280 million in May, and a BlackRock-led consortium bought Momentus Serviced Residences Novena for just over S$100 million in the same month. Earlier in February, an Indonesian tycoon acquired Oakwood Studios Singapore, a freehold serviced apartment block on Mount Elizabeth, for S$152.8 million. In alternative assets, investors are most keen on data centres, with interest also running high in student housing, CBRE's survey found. Despite the upswing in activity, Tay warned of growing concerns over trade wars and a potential recession in the next six months. In Singapore, investors are also worried that interest rate cuts may come slower than expected, he said. Nonetheless, Tay noted strong fundamentals in Singapore as the benchmark stock market index hit record highs. 'In most cycles, the performance of the equities market is a prelude to confidence and buying interest,' he explained. 'There is normally a price gap of anything from six to 12 months, so we feel positively that with the confidence in the equities market… and (what we see) coming through in the first half of this year, stronger interest will come back into Singapore's real estate market across asset classes.'
