Private property price gains capped by persistently high interest rates, ample supply in second quarter

SINGAPORE – Prices of private homes rose at a slower rate in the second quarter, which analysts attributed to subdued sales due to persistently higher mortgage rates, in addition to ample new home supply and an uncertain economic outlook.

Between April and June, overall private residential property prices grew 1.1 per cent, after a 1.4 per cent climb in the first quarter of 2024 and a 2.8 per cent gain in the fourth quarter of 2023, according to the Urban Redevelopment Authority’s (URA) flash estimates released on July 1.

For the first half of 2024, overall prices expanded by 2.5 per cent, compared with a 3.1 per cent gain in the first half of 2023 and a 4.2 per cent jump in the first half of 2022.

Analysts said slower growth in landed home prices, which rose just 1.8 per cent in the second quarter following a 2.6 per cent gain in the first quarter, weighed on overall private residential prices.

A drop in the number of new non-landed residential launches in the second quarter also had a pronounced effect on overall price growth, as new private homes typically command higher prices, said chief researcher and strategist at OrangeTee Group Christine Sun.

New home sales, excluding executive condominiums, plunged 41.4 per cent to 679 units in the second quarter, from 1,158 in the first quarter.

Resale transactions gained 8.1 per cent to 3,073 units, from 2,844 over the same period, she pointed out, citing URA data.

The drop in new launches has pushed some buyers to the resale market, which chalked up higher transactions and price growth, said Mr Nicholas Mak, chief research officer of Singapore property portal Mogul.sg.

The median transacted prices of new non-landed private homes dropped 1.5 per cent in the second quarter to $2,238 per square foot (psf) from the first quarter.

The median transacted resale prices climbed 2.1 per cent over the same period to $1,709 psf, he added.

ERA Singapore key executive officer Eugene Lim noted that the price gap between new and resale private homes continues to grow.

This is as new private home prices continue to hold due to higher interest rates as well as construction and labour costs, he said, adding that buyers see better value in resale homes.

Local interest rates, which are influenced by global ones and tend to broadly follow the direction of other central banks including the US Federal Reserve, have remained higher for longer due to the postponement of US interest rate cuts.

Prices of non-landed properties gained 0.9 per cent in the second quarter, following a 1 per cent growth in the first quarter, as a drop in prime district prices offset gains in the city fringe areas and suburbs.

Prime district prices fell 0.2 per cent in the second quarter, following a 3.4 per cent jump in the first quarter.

Prices of high-end non-landed homes are starting to flatline on a lack of demand from foreign buyers after the doubling of the additional buyer’s stamp duty to 60 per cent and as local buyers also turned selective, said Knight Frank Singapore head of research Leonard Tay.

“Prime prices are likely to remain flat between below 1 per cent and up to 2 per cent for 2024 as resale sellers who are under pressure may adjust price expectations,” he added.

In the city fringe, prices of new non-landed private homes jumped 2.2 per cent, following a 0.3 per cent gain in the first quarter, while prices in the suburbs edged up 0.3 per cent, compared with a 0.2 per cent rise in the previous quarter.

With a healthy supply from upcoming new launches, amid measured buying in the face of higher for longer interest rates, overall property prices will likely continue to stabilise in the second half of 2024, analysts said.