2023 Forecast for Singapore Residential Property Market

Despite the resilience of the Singapore residential property market, the past year has been turbulent. Cheap borrowing is long gone, inflation is up, and the economy is struggling — not to mention recent government measures to curb borrowing further.

Many would-be homebuyers are now wondering if they should pull back from the market or take the plunge. Let’s survey the situation to find the best approach.

Market conditions

Although the economy is declining, the labor market doesn’t seem to be suffering yet. Wages are growing, household net worth is rising, and unemployment is falling (from 2.1% to 2% by the end of the year). This could keep demand for properties high.

Other trends to note include a decline in household size over time (meaning demand for smaller houses),

more demand for individual spaces (due to hybrid or remote working), and more international workers moving to Singapore to fill shortages in the tech industry (which could counteract the population decline.

Measures to curb borrowing

The interest rate for medium-term stress tests was recently raised from 3.5% to 4%.

Meanwhile, the maximum loan-to-value for housing board loans went from 85% to 80%. Both measures reduce access to credit, especially at a time when mortgage rates are rising. As a result, homebuyers’ budgets will have to decrease.

A household with a yearly income of S$146,400 will now be able to take out a maximum loan value of just over S$1.4 million, down from $1.5 million previously. Comparing refinance home loan rates would be advisable for borrowers.

Investor activity

On one hand, the increasing ABSD, mortgage rates, and taxes could make property investment less attractive.

However, even if short-term returns decrease, buying properties is a way to invest in the future of Singapore — meaning that it’s still a good option for those who believe the country will prosper over the long run.

Plus, investors get to build up leverage, which isn’t the case with most other investments.

For those who still want to invest in property and compare home loan rates, the best option is to use government policies to inform their strategy.

The recent Long-Term Plan Review indicates that people are increasingly living closer to their workplaces, which is something to bear in mind.

Value buys

The residential property market isn’t all about perfect, shiny show suites. Developers may offer tempting discounts for units they haven’t been able to shift for property projects coming close to completion.

Resale houses offer another opportunity to grab a value buy, especially if the price of new homes in a specific area becomes too high.

The prime segment also tends to offer good value for money — Core Central Region (CCR) property prices only increased by 12% this cycle, which is significantly below the 42% rise in RCR prices.

Yet even in prime areas, the incentives to attract foreign workers (who then need properties) could affect demand.

Bottom line

A few factors could change everything for the Singapore property market, such as the potential for a recession or further measures to curb borrowing.

However, anyone that believes in Singapore’s future should be prepared to ride out these cycles and see good results in the long run.

The key is carrying out research before making a purchase, having sufficient holding power, and knowing at what price you’re willing to enter or exit.

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