Minister Lee: Housing prices are unlikely to sustain the momentum they have seen in the past three years. So, I encourage buyers to be prudent in their purchases to avoid overextending themselves (File Photo: EdgeProp Singapore)
In his opening address at the Building & Construction Authority-Real Estate Developers’ Association of Singapore’s Built Environment and Property Prospects Seminar on Jan 15, Desmond Lee, Minister for National Development and Minister-in-Charge of Social Services Integration, says that unprecedented disruptions caused by the pandemic over the past four years have led to a tight housing supply amid strong demand for housing.
The government ramped up the construction of new Build-To-Order (BTO) and private housing units to balance demand and supply. Around 21,400 HDB flats and 21,300 private housing units were completed in 2023, totalling 43,000. Lee notes that it is the largest number of homes completed across both the HDB and private markets in a given year - since 2018.
He adds that demand for private and public residential markets has shown signs of moderating, and transaction volumes have decreased. The total number of private housing and HDB resale transactions have fallen by about 13% and 4%, respectively, in 2023, compared to 2022.
The BTO application rate among first-timer families for all flat types in 2023 was 1.9, lower than the pre-pandemic rate of 3.7 in 2019.
Property prices have also moderated, Lee observes. Based on the 4Q2023 flash estimates, the private residential price index increased at a slower pace of 6.7% in 2023, compared to 8.6% in 2022.
Similarly, HDB resale prices increased by 4.8%, less than half the 10.4% increase in 2022. The proportion of resale flat buyers who paid cash-over-valuation (COV) also reduced significantly in 2023, halving to 15% in 4Q2023 from almost 30% in 4Q2022. Hence, most HDB resale buyers did not have to pay COV.
The moderation in transaction volume and price growth is expected to continue in 2024, impacting existing and prospective homebuyers, says Lee. "As PM Lee highlighted in his New Year's message, we should be prepared for our external environment to be less favourable in the upcoming years."
Geopolitical uncertainties continue to weigh on the global economy, and Singapore will not be immune to these effects, warns Lee.
Domestic mortgage rates are currently between 3.7% and 4.4% and are expected to remain high for an extended period. Lee adds that it will impact existing homeowners, prospective homebuyers, and overleveraged and debt-laden firms.
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After a high of 43,000 new homes completed in 2023, another 28,000 are scheduled for completion this year, and an additional 24,000 in 2025. The total number of public and private homes completed from 2023 to 2025 is just under 100,000 units.
Lee, therefore, concludes that housing prices are unlikely to sustain the momentum they have seen in the past three years. "So, I encourage buyers to be prudent in their purchases to avoid overextending themselves," he cautions.