• Still NEUTRAL; prices to moderate further in 2024. Private residential property prices rose more than expected – by 6.7% YoY in 2023 (2022: +8.6% YoY) – buoyed by selective new launches. However, the price increases continued to come in at lower volumes, indicating more selective demand amid a growing mismatch in pricing expectations. We expect 2024 to be a slow grinding year, with a further moderation in property prices. Key catalysts remain a healthy economy and resilient household balance sheets, with headwinds being increasing supply and higher interest rates.

• Expecting muted 1H, slightly better 2H. We expect property prices to remain largely flattish in 1H24, weighed by higher interest rates and likely cautious buyer sentiment. However, with economic growth expected to accelerate (RHB economists expect 2024 Singapore GDP growth to be +3% YoY, vs +1.2% YoY in 2023) and interest rates anticipated to fall in 2H, we expect property prices to recover. Overall, we raise our 2024 price forecasts to 1-4% (from 0-2% previously), mainly on the back of brightening prospects of a soft landing for the global economy. This should result in a more stable job market and higher wage growth.

• Volumes to remain sluggish amid signs of buyer fatigue. We estimate full-year private residential purchases (excluding executive condominiums (ECs)) for 2023 to be slightly below 7,000 units, or c.7% lower than 2022 levels. Overall private residential transaction volumes fell 15% YoY in 2023 to 18,510 units (up until mid-Dec 2023,) based on Urban Redevelopment Authority (URA) estimates, indicating a steeper decline in resale market transactions. For 2024, we expect primary market transactions to be slightly higher, at 7,000-7,500 units, mainly due to a higher number of new launches expected to come on-stream, while secondary market transaction volumes are likely to remain flattish. We also anticipate developers (especially in the high-end segment) of selected projects to start offering soft discounts to move inventory amidst increasing competition.

• Further cooling measures likely if prices continue to climb. Minister for National Development Desmond Lee, in his latest public remarks (link), noted that property prices are not expected to rise indefinitely, as signs of moderation are seen in public and private markets. We regard this as another sign of the Government continuing to closely monitor the property market and, possibly, more demand-side measures could be implemented if the price increase steepens (+3-5% QoQ). This could be in the form of further increases to additional buyer’s stamp duty (ABSD), seller’s stamp duty (SSD) for investment property purchases, and lower loan to value.

• Rents expected to shrink by 5-10% in 2024 as vacancy rates (8.4%) have started to climb higher on the back of more project completions (post normalisation of pandemic-led construction delays). This, coupled with sharp hikes in overall market rental rates in the last three years (+56%) reducing affordability, has led to the market being poised for a correction in 2024. We expect rental rates to fall across all market segments, with the high-end segment likely seeing the maximum impact.

Source: RHB Research - 15 Jan 2024