Year of the Dragon points to optimism for housing market: ERA

By EdgeProp Singapore

/ EdgeProp Singapore |

February 8, 2024 8:08 AM SGT

The pipeline of 32 new projects this year should offer ample choice for home buyers and investors this year. (Picture: Samuel Isaac Chua/The Edge Singapore)

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Real estate agency ERA Singapore has chosen to welcome the Year of the Dragon by putting out their forecasts for the Singapore real estate market this year.

ERA’s market report, by CEO Marcus Chu and key executive officer Eugene Lim, covers six key themes for the year that spell out “Dragon”: Dreary property news, Rate cuts projected in 2024, Ample new home choices, Growth in home prices this year, Ongoing masterplan transformations, and New home completions.

Rising household wealth among locals has helped to support a healthy residential property market over the past few years, Lim says. He expects several positive currents in the Singapore economy this year to give rise to a more buoyant economic outlook.

“Affluent Singaporeans are… picking luxury properties as their investment of choice, given the strong economic fundamentals of the market. Savvy local investors still consider the city-state a prime location for their investments,” says Chu.

For foreign investors, residential property in Singapore is still the preferred asset, says Lim. Research from ERA indicates that despite the implementation of several rounds of property cooling measures by the government, foreign buyers accounted for 25% of luxury property sales worth more than $5 million in 2023.

From left: ERA Singapore key executive officer Eugene Lim and CEO Marcus Chu. Affluent Singaporeans are picking luxury properties as their investment of choice, given the strong economic fundamentals of the market. (Picture: ERA)

In addition, expected interest rate cuts in 2H2024 could encourage more local home buyers to commit to a property purchase this year, says Lim. “Singapore’s mortgage rates could start to decrease once the US Federal Reserve initiates its rate cuts. It’s crucial to monitor the Federal Reserve’s actions in the medium term,” he says.

ERA Research forecasts that the interest rates for 2024 could range from 4.5% to 4.75%, before eventually falling to about 2.5%.

Consequently, home buyers’ sentiment could pick up, Lim reckons. “Our recommendation is to explore property purchases now, rather than waiting for the rates to actually fall,” he adds.

Positive momentum

The local real estate market will also see positive momentum, given the slew of new projects this year. ERA expects 32 new project launches this year, including the three launched so far, namely the 172-unit The Arcady at Boon Keng, the 341-unit Hillhaven and the 512-unit Lumina Grand executive condo. Another EC with about 495 units at Plantation Close in Tengah is expected to be launched sometime in 2H2024. All this will inject about 11,000 new units into the market. “More new home launches mean more opportunities for everyone in 2024,” says Lim.

Chu says that unlike 2023, there will be more launches in the Core Central Region (CCR). “Home buyers waiting for the right home in the CCR will have eight launches to choose from,” he adds.

The eight CCR projects comprise Marina View Residences, Skywaters Residences, Newport Residences, 21 Anderson, 32 Gilstead Road, the former Peace Centre, the former Kew Lodge, and a government land sale (GLS) development at Marina Gardens.

Likewise, the Outside Central Region and Rest of Central Region are set to witness another wave of new home launches, including four mega project launches in prime locations. The four mega projects are the former Chuan Park (900 units), and GLS sites at Tampines Avenue 11 (1,190 units), Toa Payoh Lorong 1 (800 units) and Jalan Tembusu (840 units).

The property market, still relatively buoyant after multiple rounds of property cooling measures, can look forward to a year of moderate growth in home prices, says Chu. “Home prices continue to trend higher due to the increase in land bid prices. Higher GLS prices have resulted in elevated launch prices for new condos and ECs,” he says.

However, the pace of price increases this year is expected to be weighed down by property cooling measures such as the increased buyer’s stamp duty rolled out in February 2023 and the higher additional buyer’s stamp duty for foreign buyers imposed in April 2023.

ERA Research estimates that there will be 13,000 to 14,000 private resale transactions this year, while prices are likely to increase by 4% to 6%. HDB resale transactions, on the other hand, are forecast to record 26,000 to 27,000 deals in 2024. HDB resale prices are expected to climb 3% to 5% y-o-y, according to ERA.

In the long term, ERA anticipates urban rejuvenation initiatives outlined in the coming Master Plan will also help to spur activity in the residential market. The spotlight is on the transformation of the Jurong East area, and the positive knock-on effect this will have on property prices there. Projects in the pipeline that can capitalise on this growth include the upcoming GLS condo at Clementi Avenue 1, the Hillshore, and The Hill @ one-north.

In the northern region, Woodlands is also in the midst of a transformation, with key growth areas emerging around the Woodlands Regional Centre, Senoko Food Zone, Seletar Aerospace Park, and Punggol Digital District. Some of the upcoming new projects in this vicinity that are well-positioned to capitalise on this rejuvenation are the condos in Lentor and the Champions Way GLS site in Woodlands.

New home completions

ERA estimates 19,968 private residential units were completed in 2023, based on URA data as at end-4Q2023. This marks one of the highest annual supply of projects obtaining Temporary Occupation Permit (TOP) since 2016, when more than 20,800 homes were completed.

Some of the largest projects that obtained TOP last year include Treasure at Tampines (2,203 units), Normanton Park (1,840 condo units and 22 strata houses), Riverfront Residences (1,451 condo units and 21 strata houses), The Florence Residences (1,410 units), and Affinity at Serangoon (1,012 condo units and 40 strata terraced houses).

This year, ERA estimates that about 10,000 homes are scheduled to be completed. “The increased supply of new homes and higher prices might lead some buyers to return to the resale market,” says Chu. “As a result, we think that resale prices could potentially rise by 4% to 6% in 2024.”

This glut of completed housing supply is expected to shift the rental market in favour of tenants, ending a nearly two-year landlords’ market in 2021-2022, says Lim. “2023 saw rents start to moderate across all regions in Singapore. This will bring about more stable rent prices this year,” he says.

Additionally, the number of HDB flats reaching their minimum occupation period (MOP) is expected to continue to moderate until 2030, from a five-year period starting 2019 that saw 115,000 new HDB flats reach their MOP. This was a major contributing factor to the 37.8% increase in resale prices between 2Q2019 and 4Q2023, says Chu.

ERA anticipates a similar trend in the public housing market from 2030, but expects a more moderate price growth due to the reclassification of flats, with Plus and Prime flats required to meet a 10-year MOP.

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