The overall sentiment in Singapore’s real estate market continued increase in the first quarter of 2024. However, industry players are now more pessimistic regarding the most desirable office, residential, and business parks/hi tech space sectors.
Real estate professionals polled by the Institute of Real Estate and Urban Studies (Ireus) of the National University of Singapore (NUS) pointed to important economic indicators that point to higher growth, low unemployment rates and the slowing of core inflation as reasons for overall improved sentiment.
Yet, survey respondents were more negative than they were positive regarding prospects for the top residential segment.
Since the government has increased the quantity of land owned by the government over the last few months We are concerned about a possible oversupply. The possibility of cooling measures is always a concern.
The outlook for the prime residential sector remains subdued. Investors and foreign buyers are still affected by the Stamp duty for Additional Buyers.
The prices of private residential properties rose 1.4 per cent in the first quarter of 2024. It was lower than the 2.8 percent increase in the fourth quarter of 2023. This is the lowest annual increase in the first quarter since Q3 2021.
Despite that it was true that real estate agents did not anticipate that developers would delay new launches or reduce prices, even though less respondents anticipated that the prices of new launches to rise.
In Q1, 22.2 percent of respondents said that prices for unit units of new launches will be somewhat higher in the coming six months, down from 42.9% in the previous quarter. However, 72.2% of them believed that prices would be similar. This is an increase over 47.6 percent in the previous quarter.
Only 5,6% of real estate players believe that prices will be a little lower.
Ireus reported that 27.8 percent of respondents are expecting to see a slightly higher or greater number of units in the next half year, a drop of 29 percentage points from the quarter ending in 2023. However, 72.2% of respondents anticipate that the number will remain at the similar. This is a substantial rise from the prior quarter’s 42.9%.
No one surveyed thought that the number of units released would decrease.
Homebuyers are becoming more sophisticated and resistant to high prices despite the fact that there are several new developments. Developers may employ a more sensitive pricing approach, but major price changes are unlikely due to the developments and land costs that are already incurred.
Prices and demand are likely to be aided by healthy households’ balance sheets, low unemployment, and a stable economy.
Ireus The company that conducts this quarterly survey, said that the respondents were the most optimistic about the future for the sector of hotel/serviced apartments. This optimism was boosted by the high number of guests and the revenues they generated.
Professionals from the industry were also more optimistic than negative on suburban retail as well as the business of industrial/logistics.
The future sentiment index which reflects sentiment over the next six months, climbed to 5.1 over the five-point neutrality score for the first time in 5 consecutive months, said Ireus.
The current indicator of sentiment, which reflects sentiment for the last six months has increased to 4.7 from 4.4 in the prior quarter. The mood has improved in the past six months. The index grew from a score 4.2 in the third quarter of 2023 to an index of 4.4 at the year’s end.
Overall the macroeconomic indicators in Singapore are in good shape with no unexpected surprises. These indicators, if they do not happen, point to a healthy economy that is likely to recover in the coming year.
According to the Ministry of Trade and Industry’s Q1 update, the economy grew by 2.7 per cent on a yearly basis during the first quarter more than the 2.2 per cent growth recorded in the prior quarter. The growth forecast for 2024 remains healthy, between the 1 and 3 per cent range.
The stronger Singapore dollar that helped to reduce inflation, was also a factor in the improvement of mood during Q1.
In the areas where industry players were the most negative, within the primary residential sector, responses recorded a future net balance of minus 44 percent compared to the 18 percent that was minus in the prior quarter.
The office industry and business parks, was also pessimistic.
This is in line with URA’s data which revealed that the office rental index fell 1.7 per cent for the central region in the first quarter of 2024, after having risen 27.5 per cent over nine consecutive quarters.
The growth in the quarter-onquarter rate of 0.3% at the end 2023 will be a stark contrast from the 0.3 percent growth in quarterly revenue today.
Work-from-home arrangements dampen office morale and can encourage a desire for quality in firms.
A slowdown in global economic growth was the main risk factor to be aware of However, slightly less cited it this time around in Q1 – 73.5 percent of respondents as opposed to 89.5 percent who did last quarter. Further, 55.9% in Q1 cited the deterioration of the domestic economic outlook as a key risk reason. This compares to 57.9 percent in Q4 of 2023.
Concerns over inflation/interest rates came in third, with a 50%, which is compared with 44.7 percent in the fourth quarter.
In Q1 the property industry’s top executives were more aware of the tightening of liquidity and financing in the market for debt as a potential risk, up from 42.1 per cent in the previous quarter to 47.1 per cent. The increasing supply of development land also raised more worries, ranging from 23.7 percent in the fourth quarter to 29.4 percent in Q1.
In Q1 respondents expressed less concern about the increasing cost of construction, numerous properties being launched and the government’s efforts to cool down the market.
The chance of a property price inflation was rated the lowest, rising to 2.9 percent in Q1 from 2.6 per cent in Q4.
In the Q1 survey, respondents noted land and labour as the most important concerns for the upcoming six months, at 22.2 per cent each. Other factors that they were concerned about included finance (16.7 per cent) and construction materials (11.1 per cent).
The Real Estate Sentiment Index is the result of a study among senior executives involved in Singapore’s real estate and development sector, which includes developers, consultants, financial institutions, professional companies, and service providers.