Singapore's property market is hard to read

The Star

5 days ago

TWO years ago, Singapore doubled the stamp duty on foreign homebuyers to a steep 60%.
Since then, residential property has become a twin-speed market.
Prices of high-end downtown condominiums, which used to attract heavy Chinese demand, have grown at a much slower pace than more affordable suburban apartments aimed at local owners.
This divergence is starting to cloud the outlook for real estate in the Asian financial centre. Sales of new homes fell to 663 last month, down from 729 in March.
Does that mean that economic concerns, particularly around trade, are making prospective owners cautious?
I'm not quite willing to buy into the pessimism – not yet. Local demand is still robust. But it isn't reflected in developer sales that are skewed toward the central region, which is more of a playground for the global rich.
Real estate activity is no doubt sluggish in downtown Singapore, where condo prices have risen 19% in the past five years, compared with a 46% surge in the outskirts.
A protracted slump in the Chinese property industry is partly to blame. Coupled with weak consumer spending, the downturn has shrunk the number of super-wealthy on the annual Harun China Rich List by 25% over three years.
Still, mainland Chinese had held on to their No. 1 position among foreign buyers for six straight years, until the city-state raised its stamp duties in April 2023.
One Marina Gardens, situated on the edge of the central business district, sold only 41% of the 937 units released in April, according to broker CBRE.
That, it says, compares with a sell-through rate of 68% for major projects over their launch weekends in the first quarter.
Expect the sales numbers to remain lackluster in the coming months, too. That's because most of the supply pipeline is from the city centre or its fringes.
These pricey homes can't possibly whip up as much excitement – or volumes – as more reasonably priced suburban dwellings.
Singapore's wealth engine
Gains from reselling public housing units are supporting private apartments.
When developers did make them available earlier in the year, the take-up rate for budget-friendly projects in the island's east and northeast, far from the bustle of its business and shopping districts, was 90% to 95%.
The source of this resilience is the booming resale market in public housing, where prices have increased faster than private homes since the pandemic.
Gains from selling Housing and Development Board (HDB) apartments are getting parked in private property, putting local Singaporean demand in the driving seat of the overall market. (Citizens are allowed to sell their subsidised HDB apartments to eligible buyers after occupying them for at least five years.)
Singapore's private home prices could grow by up to 7% in 2025, according to a recent Savills report. That would be better than last year's near-4% increase.
Not everyone agrees with the cheery prognosis.
Analysts at Bloomberg Intelligence are penciling in only a 3% rise. Rival Hong Kong could do better, they say, because of its lower interest rates and solid pent-up demand.
Although borrowing costs have also cooled in Singapore, the decline in Hong Kong's benchmark interbank rate – from 4% in late April to 0.6% now – has been nothing short of dramatic.
Singapore has competition
Plunging interest rates are making Hong Kong property more attractive.
The other key factor will be affordability. At a little over 2%, the unemployment rate in Singapore is one percentage point lower than in Hong Kong, while median household income from work last year was 20% higher than just before the pandemic.
The resident population has gotten used to paying more than S$2,000 ($1,550) per sq ft even in far-flung neighbourhoods, provided there are major government plans to improve transport connectivity and quality of living in those areas.
One-bedroom units outside the central region are in high demand.
This is slightly puzzling because the buyers are mostly Singaporeans, who don't quite like to live in Hong Kong-style matchboxes.
But what if these smaller homes are not for self-occupation? As long as rental demand stays strong, the wealth accumulated in public housing could keep translating into one million to two million checks for investment properties.
The possibility of a technical recession is not very high on the domestic investor's list of worries.
The fate of Hong Kong property this year may be decided by an influx of foreigners and mainland Chinese into the city, pushing rents higher.
House keys in Singapore, however, will very much remain with the locals. — Bloomberg
Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. The views expressed here are the writer's own.