OVERALL sentiment in Singapore’s real estate trade continued to improve in the first quarter of 2024, but industry players have turned markedly more pessimistic on the prime residential sector, as well as the office and the business park/hi-tech space sectors.
Real estate executives polled by the Institute of Real Estate and Urban Studies (Ireus) of the National University of Singapore (NUS) cited major economic indicators pointing to higher growth, low unemployment rate and the easing of core inflation as reasons for overall improved sentiment.
Yet, survey respondents were notably more negative than positive on prospects for the prime residential segment.
“We are concerned with potential oversupply of residential apartments as the government ramps up government land sales supply over the last few (quarters). Potential cooling measures are always a concern,” commented one survey respondent.
Sing Tien Foo, provost’s chair professor of real estate at the NUS Business School, said: “The outlook of the prime residential sector remains subdued. The Additional Buyer’s Stamp Duty still impacts demand from foreign buyers and investors.”
Data from the Urban Redevelopment Authority (URA) showed that prices of private residential properties rose 1.4 per cent in the first quarter of 2024, slower than the 2.8 per cent gain in Q4 2023. The latest figure is also the slowest quarterly gain since Q3 2021.
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Despite that, real estate players did not anticipate that developers would hold back new launches or reduce prices, although fewer respondents expected new launch prices to increase.
In Q1, 22.2 per cent of respondents expected unit prices of new launches in the next six months to be moderately higher, down from 42.9 per cent in the preceding quarter, while 72.2 per cent of them believed new launch prices would be the same, up from 47.6 per cent in the last quarter.
Only 5.6 per cent of property players expected prices to be moderately less.
Among respondents, 27.8 per cent of them expect a moderately or substantially higher number of units to be launched in the next six months, down 29 percentage points from Q4 2023; 72.2 per cent of them expect the number to remain the same, a sizeable increase from last quarter’s 42.9 per cent, said Ireus.
None of the respondents felt that the number of units launched would decrease.
“Homebuyers have become more resistant to high price points and discerning amid ample new project options. While developers are expected to adopt sensitive pricing strategies, major price corrections are unlikely due to previously committed land and development costs,” said a survey respondent.
“Healthy household balance sheets and the prevailing low unemployment level are also expected to continue supporting demand and prices,” they added.
Those polled were most optimistic about prospects in the hotel/serviced apartment sector, buoyed by strong tourism arrivals and receipts, said Ireus, which conducts the quarterly survey.
Industry professionals were also more positive than negative on suburban retail and the industrial/logistics business.
Notably, the future sentiment index – reflecting sentiment over the next six months – reached 5.1, above the neutral score of five, for the first time in five consecutive months, said Ireus.
The current sentiment index – reflecting sentiment over the past six months – inched up to 4.7 in Q1, from a score of 4.4 in the preceding quarter. Sentiment has picked up in the last six months. The index edged up from a score of 4.2 in Q3 2023 to 4.4 at the end of last year.
Ireus’ director Qian Wenlan said: “Overall, Singapore’s macroeconomic indicators are doing well, which barring unforeseen shocks, point to a healthy economy that could recover over the year ahead.”
Based on the Ministry of Trade and Industry’s Q1 update, the economy grew by 2.7 per cent on a yearly basis over the first quarter, faster than the 2.2 per cent growth recorded for the previous quarter. For 2024, projected growth remains healthy, between the 1 and 3 per cent range.
The improved sentiment in Q1 was also due to a strong Singapore dollar which has helped to ease inflation, said Prof Qian.
Where industry players were most downbeat, in the prime residential sector, responses recorded a future net balance of minus 44 per cent versus minus 18 per cent in the previous quarter.
Industry players were also pessimistic on the office sector and on business parks.
This is in line with URA’s figures which showed that the office rental index fell 1.7 per cent for the central region in Q1 2024 after climbing 27.5 per cent over nine consecutive quarters.
This contrasts with the 0.3 per cent quarter-on-quarter increase seen at the end of 2023.
Prof Sing said: “The work-from-home arrangement dampens office sentiment and encourages a flight to quality among firms.”
While a slowdown in the global economy was the top risk to watch again, slightly fewer flagged it – about 73.5 per cent of respondents compared to 89.5 per cent during last quarter. Another 55.9 per cent in Q1 cited job losses/decline in the domestic economy as another major risk factor, versus 57.9 per cent of them who said so in Q4 2023.
Concerns over rising inflation/interest rates ranked third among the top risks at 50 per cent, up from 44.7 per cent in Q4.
In Q1, more property executives identified the tightening of financing/liquidity in the debt market as potential risk, up from 42.1 per cent last quarter to 47.1 per cent. The increased supply of new development land also raised more concerns, from 23.7 per cent in Q4 to 29.4 per cent this quarter.
On the other hand, respondents were less concerned in Q1 about rising costs of construction, excessive supply of new property launches, and government intervention to cool the market.
The risk of a real estate price bubble ranked the lowest, rising to 2.9 per cent in Q1 from 2.6 per cent in Q4.
In Q1, respondents identified land and labour as the top concerns over the next six months, at 22.2 per cent each. Other factors that respondents were concerned about include finance (16.7 per cent) and building materials (11.1 per cent).
The Real Estate Sentiment Index is the result of a poll among senior executives involved in Singapore’s real estate and development industry, and includes developers, consultants, financial institutions, professional firms and service providers.
