The general sentiment of Singapore’s real estate industry continued to improve during the first quarter of 2024, however, the industry has turned markedly more pessimistic on the primary residential sector and also the office and hi-tech and business parks.
Real estate professionals polled by the Institute of Real Estate and Urban Studies (Ireus) of the National University of Singapore (NUS) pointed to important economic indicators that point to an increase in growth, a lower unemployment rates and the slowing of core inflation as reasons for a general improvement in the mood.
Yet, survey respondents were significantly more negative than positive about prospects for the residential prime segment.
As the government has increased the quantity of land owned by the government in the past few quarters, we are worried about an oversupply. Potential cooling measures are always a concern.
The outlook for the premier residential sector is still subdued. Foreign investors and buyers remain impacted by Stamp duty for Additional Buyers.
The prices of homes rose in 1.4 percent in the first quarter of 2024. This is less than the 2.8% increase in Q4 of 2023. The latest figure is also the slowest quarterly gain since Q3 2021.
Real estate agents didn’t anticipate developers to delay or reduce new launches, but fewer were expecting them to increase prices.
In Q1, 22.2 per cent of respondents predicted unit prices for new launches over the next six months to be slightly higher, down from 42.9 per cent in the preceding quarter. Meanwhile, 72.2 percent thought that prices for new launches would be the same, up from 47.6 per cent in the last quarter.
Just 5.6 per cent of the property owners were expecting prices to be somewhat less.
Ireus said that 27.8 percent of respondents are expecting to see a slightly higher or more units over the coming quarter, a drop of 29 percentage points compared to the Q4 2023. However, 72.2% of respondents believe that the numbers will remain the similar. This is a substantial improvement over the previous quarter’s 42.9 percent.
Nobody in the survey thought the number units being launched would decline.
Homebuyers have become more resistant to high price points and being discerning among the numerous possibilities for new projects. Developers are expected to implement more shrewd pricing strategies, major price adjustments are unlikely due to previously committed land and development costs.
The healthy balance sheets of households and the current low unemployment rate are expected to keep boosting the economy and prices.
The respondents were the most optimistic about prospects in the hotel/serviced apartment sector that was buoyed by the growth in tourism arrivals and receipts according to Ireus which conducts the quarterly survey.
Industry professionals were also more positive than those who were negative about suburban retail and the business of industrial/logistics.
Ireus reported that the index of future sentiment that measures sentiment for the next six-month period, has reached 5.1 points, which is above neutral, in the initial five months in a row.
The current index of sentiment, which reflects sentiment over the past six months, inched up to 4.7 in Q1 from 4.4 during the preceding quarter. The mood has improved in the past six months. The index has risen from a score of 4.2 in Q3 2023 and climbed to 4.4 at the close of the year.
Overall, Singapore’s macroeconomic indicators are doing well, which barring unforeseen shocks, point to a healthy economy that could recover over the next year.
According to the Q1 update released by the Ministry of Trade and Industry The economy expanded by 2.7 percent on an annual basis in the first quarter, which is higher than the 2.2 percent growth reported in the prior quarter. The growth forecast for 2024 is expected to be healthy, with a range of 1 to 3 percent interval.
The stronger Singapore dollar, which helped ease inflation is also a factor in the positive mood of Q1.
The industry’s top players were the most sour, in the prime residential sector respondents reported a net balance of minus 44 per cent versus less than 18 percent in the prior quarter.
The office sector along with business parks, were also pessimistic.
This is in line with URA’s data which revealed that the office rental index fell 1.7 percent for the central region in Q1 2024 after climbing 27.5 percent over nine quarters.
This is in contrast to the 0.3 percent quarter-on-quarter growth that was observed at the end of 2023.
The work-from-home model can reduce office atmosphere and encourage a flight to quality among businesses.
A slowdown in global economic growth was the main threat to watch However, slightly less cited it this time around in Q1 – 73.5 percent of those polled, compared to 89.5 percent who said so last quarter. Further, 55.9% in Q1 cited the deterioration in the national economic situation as a major risk reason. This is in contrast to 57.9 percent in Q4 of 2023.
Inflation and interest rates ranked third among the top risks with 50 per cent, up from 44.7 percent in the fourth quarter.
In Q1, property executives cited the tightening financing/liquidity on the debt market, which increased from 42.1% last quarter to 47.1%. In the first quarter, the increased amount of land for development was causing questions ranging from 23.7% in Q4 up to 29.4 percent this quarter.
On the other hand respondents were less concerned in Q1 about rising costs of construction, excessive supply of new properties and the government’s intervention to cool the market.
The highest risk was a real estate bubble that grew to 2,9% in Q1 from 2,6% in Q4.
Land and labour were identified as the top two concerns for the next six months by participants in Q1. Finance (16.7%) and building material (11.1%) were also factors people cited as causes of concern.
The Real Estate Sentiment Index was compiled from a survey of top executives in the Singapore real estate industry. This includes consultants, developers as well as financial institutions, professional companies and service providers.