The latest government statistics on Singapore’s housing market show signs of stabilisation, despite high interest rates and cooling measures, as well as cautious economic sentiments.

The leasing market is also showing signs of a demand-supply equilibrium, as the rental rate continues to moderate, despite a surge in home completions in this year’s Q3, especially.

Market watchers are beginning to accept the idea of price stabilization, even though the Urban Redevelopment Authority (URA), in its Q3 2023 overall index for private homes rose by 0.8 percent quarter on quarter. The increase was higher than URA’s Flash Estimate released on October 2, and was in contrast to a drop of 0.2% quarter-on-quarter in the second half of 2023 after the most recent property cooling measures had been implemented in late April.

The benchmark index has risen by 4.4 percent since a year earlier. This may appear to be in contrast with current macroeconomic and geopolitical sentiment.

Knight Frank Singapore’s research chief Leonard Tay put things into perspective: “URA’s overall private house price index for the third quarter of 2023 represents a 3.9% increase over Q4 2022.” Our projection is for a 4-plus percent increase over the full year 2023.

“This would be a significant slowdown of price growth following the increases of 8.6 percent in 2022, and 10.6 percent in 2021.”

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The 3.5% drop in private home sales to 5,201 in Q3 from 5,388 in the prior quarter is another sign that the market has stabilized. Both developer sales as well as the resale markets declined, but sub-sale volume increased to 355 from 285 in Q2 of 2023.

Cushman & Wakefield’s head of research in Singapore and South-east Asia, Wong Xian Yang, said that overall sales volumes have been tempered due to home buyers becoming more selective and price-sensitive as a result of a combination of factors, such as high financing costs, a large selection of launch options on the horizon, recent cooling measure and economic uncertainty. Many buyers wait for lower prices.

Tricia Song of CBRE’s Singapore and South-east Asia research team noted that the take-up rate for private residential launches is generally lower this year than it was last, as buyers have become more resistant to higher prices and are tired.

URA figures show that in Q3, developers offered 2,805 private units of unfinished residential housing for sale, up from the 2,374 in the preceding quarter. The number of homes sold by developers fell 8.5% to 1,946 in Q3, down from 2,127 in Q2.

In Q3, the 2900 resale units were 2.6% lower than in the prior quarter. In Q3, 55.8% of sales were resale, a slight increase from the previous quarter’s share (55.2%).

Nicholas Mak, Chief Research Officer of Mogul.sg expects that the total number of housing units in both the primary and secondary market will range between 18,000 to 19,300, a decrease from the 21,890 sold last year.

The drop is attributed to the “growing headwinds that will affect the residential real estate market over the next few months such as the weakening of the rental market, the increase in unsold inventory, the high cost of borrowing and the economic uncertainty”.

URA’s rental index rose by 0.8% quarter-on-quarter in Q3. The increase was smaller than the increases of 2.8% in Q2, and 7.2% in the first three months this year.

The index has increased 19.3 percent in the last year.

URA stated that the rental increase has been moderated over the past four quarters. The 0.8 percent rise in Q3 of 2023 is the lowest quarter-on quarter gain since the last quarter of 2020.

Tay, of Knight Frank, predicts that rental movement will be between minus 1% and plus 1% in the next quarters.

CBRE’s Song also expects that rents will start to ease over the next couple of quarters. Mak predicts that URA’s index of rental prices will continue to grow by between 11 and 13 percent this year. It could contract in 2024 and show a drop from 6 to 12 percent for the entire year.

He added, “The rental markets are becoming a market for tenants.”

URA’s private rental index grew by 29.7% last year, after increasing 9.9% in 2021. The rental increase was due in part to a sharp drop in the number of housing completions as a result of Covid construction disruptions and supply chain interruptions around the world.

According to URA data, vacancy rates for private residences rose from 6.3% in Q2 to 8.4% at the end of Q3, up from 5.7% in Q3 2020.

In Q3 of 2023, the growth rate in rental index was slower. However, the total number of housing units built in private homes increased to 8,517 during this quarter. This brings the total for the nine-month period to 15,883 houses.

The full year figure, including 3,167 additional private homes scheduled for completion in the fourth quarter of 2023, is estimated to reach 19,050, which will be the highest level since 2016, when 20,803 homes were finished.

According to developers’ reported completion dates, 9 875 private houses are expected to be completed in 2019.

Mak added: “As the number of private and public housing units increases in coming months, residents may decide not to renew their leases while they wait for their homes to be finished.”

CBRE Song also said that “Expatriate Demand could Moderate as Companies Restructure and Cut Back on Hiring amid Challenged Economic Conditions.”