Increasing affluence continues to fuel housing demand and prices, but economic uncertainty could test market: Knight Frank

Business Times

24-07-2025

[SINGAPORE] Interest rate cuts, growing affluence and low unemployment rates spell good news for Singapore's private residential market, but a cocktail of challenges could test the otherwise resilient sector.
At a property market seminar organised by the Real Estate Developers' Association (Redas) on Thursday (Jul 24), Knight Frank research head Leonard Tay noted that geopolitical conflicts and ongoing trade tensions threaten to weigh on private housing sentiment this year.
'On the local front, it is more costly to own or keep a property, not only to buy,' said Tay, pointing to higher property tax, as well as increase in seller's stamp duty period and rates.
Still, he reckoned that these may be blips in the market's long history of resilience. Between 1980 and 2024, private home prices in the city-state grew almost eight times with a compounded annual growth rate of 5.1 per cent.
This came despite various regional and global downturns since the 1980s, from the Asian Financial Crisis in the late 1990s to the global financial crisis in 2008 and the latest Covid-19 pandemic in 2020.
The market's resilience is especially evident in the last eight years, Tay said, with private home prices rising 55.3 per cent even as new cooling measures rolled out, on top of a pandemic and global shutdown.
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Demand and price growth also continues to be fuelled by steadily improving economic affluence, said Tay.
In 2024, the level of household liabilities was around 35 per cent of liquid assets – down from over 50 per cent in the 1990s.
Household net worth – that is, liquid assets excluding the value of their homes and Central Provident Fund – has been on the rise over the past two decades and now stands at over S$1 trillion, versus under S$600 billion a decade ago.
At the same time, the easing of interest rates means more liquidity for Singapore residents – who form the bulk of housing demand – to purchase homes, said Tay. 'This has brought those who are sitting on the sidelines… back in play.'
The overall unemployment rate also remains relatively low, not increasing over 3.6 per cent in the past 30 years, providing a sustainable base for most households, he said.
'However, should Singapore slide into a recession that is accompanied by pay cuts, salary freezes and job losses, potential homebuyers will retreat to defensive positions, resulting in a fall in transaction volume,' said Tay. 'In such a scenario, there is every chance the government will provide some fiscal relief in the form of an off-budget stimulus package top prop up the economy, as in the past.'
Growing prices vs affordability
A separate study published by Knight Frank on the same day showed that although Singapore homes have grown much more expensive over the years, that was not to say that they were much less affordable.
In the private housing sector, the study indicated that the median price of new homes was nearly 19 times that of household incomes in 2024, from being 11.8 times higher in 2019.
Much of the price increase was due to pent-up demand during the pandemic, against limited supply. This was further compounded by construction delays and a lack of development land sales during the period, which led developers to bid aggressively for land in most of 2021 and 2022, said Knight Frank.
Global inflation also meant higher construction costs, and therefore the elevated new home prices between 2021 and 2024, it said.
The private resale market, on the other hand, saw a more consistent price-to-income ratio in the past 15 years – from a low of 9.8 in 2016, to a peak of 13.3 in 2012 and 2013. Most recently in 2024, the ratio was 12.1.
Resale prices of private homes were also higher vis-a-vis household incomes over a decade ago, compared with 2024, Knight Frank noted. 'This strongly points to… new sales (being) the main cause of overall price growth in the past five years.'
The modest changes in the resale market's price-to-income ratio indicates that 'there are possible affordable options in the resale market', it added.
'Nonetheless, holding and cost of property upkeep have increased in the post-pandemic period of inflation,' said the consultancy. 'Increases in property tax might have also led private homeowners to rationalise and right-size their real estate portfolios.'
As for public housing, Knight Frank noted that the average resale price-to-income ratio has been steadily rising since 2019, from 3.8 to 4.6 in 2024.
Still, when compared to that of non-landed private homes, Housing & Development Board (HDB) homes remain 'much more affordable', it said. 'Even so, HDB resale prices have increased and show signs of continuing to increase, remaining on the path of reaching the high of 5.1 last recorded in 2013.'
Knight Frank's survey found housing prices and affordability were the overriding priorities for the vast majority of Singapore residents when buying a home.
'While price growth has slowed and been reined in, housing affordability remains a pressing issue, particularly for younger buyers or those looking to upgrade,' said Knight Frank.