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Developer sentiment in prime residential market turned negative in 2Q2023

By EdgeProp Singapore

/ EdgeProp Singapore |

August 30, 2023 9:26 PM SGT

The effects of the two successive rounds of property cooling measures in September 2022 and late April 2023 are now being felt (Photo: Samuel Isaac Chua/EdgeProp Singapore)

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According to the National University of Singapore (NUS) Real Estate in the 2Q2023 sentiment survey released on Aug 30, a slowdown in the global economy is the top concern among senior executives of Singapore's real estate and development industry. It was cited as the most significant risk by 92.5% of the respondents polled.

A slowing Chinese economy is another major dampener on investor and consumer confidence, given that China is Singapore's largest export market, accounting for nearly 15% of non-oil domestic exports in 2022, said Institute of Real Estate and Urban Studies director, Professor Qian Wenlan.

Of those surveyed, 72.5% indicated rising inflation and interest rates as another major risk factor.

Government intervention to cool the market ranked third at 60% in 2Q2023, increasing slightly from 54.5% in 1Q2023.

Potential Risks

The effects of the two successive rounds of property cooling measures in September 2022 and late April 2023 are now being felt. According to the survey, the prime residential sector was the most adversely affected in 2Q2023, with a negative net current balance of -40%.

"Foreign buyers account for a sizeable demand for high-end properties here," said Qian. "The dismal performance of prime residential homes in the second quarter could be attributed to foreigners now having to pay a hefty 60% ABSD [additional buyer's stamp duty] to purchase any residential property."

Real Estate Performance

The suburban residential sector, in contrast, remained relatively resilient, recording a negative net current balance of only -8%. "Among other factors, pent-up demand arising from construction delays during Covid will continue to drive transactions among genuine homebuyers," said Qian.

In 2Q2023, 45% of the developers expected a moderately or substantially higher number of units to be launched in the next six months. About 50% of developers highlighted financing as the top concern in 2Q2023, an increase from 35.3% in the previous quarter.

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