Despite the government's property cooling measures, prices of Singapore’s property market continued to go up in 2022. Data released by the URA showed that the price of private properties went up by 8.4% and HDB resale prices rose 10.3% in 2022. Will property prices continue to go up or will they become cheaper in 2023? In today’s article, we look at some factors that may affect the market this year.
The Russia-Ukraine conflict does not look to be ending anytime soon - the latest development is that Russia and Belarus have begun joint air force drills, leading to speculation that Russia could soon use Belarus to launch an assault into Ukraine. This may lead to widespread economic uncertainty worldwide.
The China-US relationship has reached its lowest point in decades and is not showing signs of improvement with both sides trading barbs. China-Taiwan issues are also another factor to look out for, and the North-South Korean conflict could escalate ever since North Korea started testing missiles by firing them into the sea east of the Korean Peninsula.
If any of the above conflicts escalate into something bigger, economic conditions may worsen and could slow down growth and dampen property prices.
The US Federal Reserve raised interest rates 7 times in 2022, resulting in the benchmark interest rate at its highest level in 15 years. Will it continue to go up? The next Federal Reserve meeting will take place in February and it is likely that there will be another increase albeit with a smaller rate hike. Any increases in mortgage interest rates will likely see a continued increase which in turn can decrease buying demand, leading to a slow down in prices.
In December 2022, the URA released details of the Government Land Sales (GLS) programme for the first half of 2023 with 7 confirmed list sites and 9 reserve sites, which could potentially add about 7,715 private residential units. If there is an increased supply of new homes coming into the market, competition for units may be moderated and that could be a signal that resale prices may not rise as much as in previous years.
HDB resale prices rose 10.3% last year, recording 11 consecutive quarters of increase. To meet market demand and curb runaway resale prices, HDB announced that it will ramp up completion of BTO flats. The government is also planning to launch up to 23,000 units this year to cater to market demands and introduce more grants for first-time buyers of resale flats. As such, industry experts believe that HDB resale prices will continue to go up but at a slower pace than the previous quarters.
So will property prices become cheaper or more expensive? A lot will depend on external factors outside of Singapore. With China re-opening its borders, we could see an influx of buyers that would spell good news for the local property market, especially the luxury property segment. However, for the average Singaporean, this could mean a higher demand and a rise in prices in the resale market.
Over the long run, it would be possible to witness sellers of non-luxury properties lower their expectations and hence their prices, leading to a dampened property market. With 2023 just beginning, we will just have to wait and see.