Summary
(1) Despite the declining number of private housing units sold in the prime CCR, home prices in this segment increased faster than the other two market segments in 1Q 2024.
(2) The healthy price growth in the CCR is driven by demand in the resale market, as more buyers turn to the high-end property resale market due to the low supply in the primary market.
(3) Notwithstanding the higher ABSD rates for non-Singaporeans, foreign buyers including permanent residents, still display an affinity for prime residential properties, acquiring 21.9% of the private homes sold in the CCR.
(4) Housing prices in the CCR is expected to outperform the other market segments this year.
Introduction
In the first three months of this year, the overall private residential property price index increased by 1.4% quarter-on-quarter (qoq), which is half of the 2.8% price increase in 4Q 2023.
Strong price growth in CCR from the resale market
Among the different market segments, the prices of high-end non-landed housing in the Core Central Region (CCR) enjoyed the highest rate of quarterly increase of 3.4% in 1Q 2024, compared to the muted 0.3% and 0.2% qoq property price expansion in the city-fringe Rest of Central Region (RCR) and suburban Outside Central Region (OCR) respectively. The 3.4% price increase in the CCR is more than triple the 1.0% price growth for non-landed residential properties islandwide.
Typically, the primary sales or property sales by developers would contribute to the faster price growth because the prices of new homes sold by developers are usually higher than the price of resale properties in terms of dollar per square foot ($psf).
However, real estate developers released only 20 new housing units in the CCR last quarter, the lowest quarterly number of units launched since 3Q 2018. The low number of units launched in 3Q 2018 was a market reaction to the introduction of the property cooling measures in July 2018 by the government.
The small number of housing units launched in 1Q 2024 led to a 50.7% drop in CCR primary sales to only 106 units in that quarter, which is the lowest quarterly primary sales volume in the past five years.
Therefore, the strong private housing price growth in the CCR stemmed from the resale market. In the January to March period this year, 81.0% of the transacted private housing units in the prime districts exchanged hands in the resale market. The 81% share is the highest proportion of CCR housing units sold in the resale market since the last quarter of the previous bull run in 2Q 2018.
Singaporeans are taking up the slack
The proportion of private residential properties purchased by foreigners continue to decrease since April 2023 when the government hiked the Additional Buyer’s Stamp Duty (ABSD) to 60% for foreign buyers of local residential properties.
In 1Q 2024, only 1 out of every 100 private housing units sold islandwide was bought by a foreigner without permanent resident status in Singapore. In 1Q 2023, before the latest round of property market curbs, 6.3% of the private housing units transacted were bought by foreigners.
Table 1: Proportion of private housing units sold islandwide based on buyer's residential status
Source: Mogul.sg Research, Realis
Singaporean homebuyers has been taking up the slack from the decline in the market share of foreign buyers. In 1Q 2023, 72.2% of the transacted private homes were purchased by Singaporeans. That figure has risen to 83.7% in the first three months of this year.
The same story is repeated in the Core Central Region (CCR). The proportion of private homes purchased by non-Permanent Residents (NPR) foreigners fell from 15.0% in 1Q 2023 (before the 2023 cooling measures), to 3.3% in 1Q 2024.
However, foreigners, both Singapore Permanent Residents (SPR) and NPR, display an affinity for prime residential properties. Together, they acquired about 21.9% of the private homes sold in the CCR, compared to 16.0% islandwide in the first quarter of this year.
Table 2: Proportion of private housing units sold in the Core Central Region based on buyer's residential status
Source: Mogul.sg Research, Realis
What does this mean for the high-end housing market?
Our analysis of the latest real estate numbers show that there is latent demand for prime properties among locals and foreigners. If there is insufficient new supply in the primary market, some buyers will house-hunt in the resale market.
Resale property prices are usually lower than that of newly launched properties in terms of dollar per square foot. Notwithstanding the increase in the number of private housing units sold by developers in the RCR and OCR, the price growth in these two market segments were modest at best.
On the other hand, if the CCR resale property sales could propel price at a faster rate than those in the other two market segments, it is good news for home sellers and developers with upcoming residential launches in the CCR.
It means that there is underlying housing demand in the CCR that could support the new launches, provided the prices of the new properties are reasonable.
Market Outlook
The private housing market is expected to fare reasonably well despite the economic uncertainty and “higher for longer” interest rates this year. The steady price growth in the HDB resale market and housing aspirations of upgraders will support the demand in the OCR and RCR markets. For the whole of this year, the overall private residential property price index could expand by 4% to 6%.
However, the CCR property price index is expected to grow by 6% to 8% this year, outperforming the price indices of other market segments, as well-heeled buyers hunt for trophy assets in the luxury housing market segment.
Developers could sell between 6,000 and 7,500 housing units in 2024 as they pace the launches of their new developments. A caveat is that our estimates above are based on the assumption that the government will not introduce any further cooling measures this year.