As mortgage rates rise and financing terms tighten, there is an overall increase in demand for smaller and less expensive units.
With the liberalisation of borders, demand from expatriates is set to rise slowly. The increase in buyer's stamp duty in the new Budget is expected to have less impact on homebuyers and investors.
According to the Urban Redevelopment Authority of Singapore (URA), new private home sales in January 2023 jumped by 1.3 times compared to the previous month.
Forty per cent of these sales came from the new Sceneca Residence development in Tanah Merah, where a total of 157 units were sold in January.
This suburban development is the first major non-landed private residential development to open in Singapore following the September 2022 cooling measures.
Overall, private residential sales outside the Central District (OCR), which represents the mass private residential sector, accounted for almost half (47%) of new private residential sales in January, while the Core Central District (CCR), which represents upscale private residential, and the Other Core Region (RCR), which represents mid-range condominiums, accounted for 40% and 12% of sales respectively.
Fewer private residential units were opened last December, with only 45 new units, while nearly ten times that number were opened in January.
Unlike private home sales in the Outside Central Region (OCR) and Core Central Region (CCR), sales of new private homes in the Other Core Region (RCR) were lower in January.
However, this is likely due to the lack of new openings in the area, with only 105 new units coming to the market in January. Outside the Central District (OCR), however, the increase in private sales was mainly due to the 270 new units launched in the area in January, far more than the other two districts.
In terms of demand for new private residential units, demand for units of 93 square metres and below (1,000 square feet and below) increased significantly compared to December last year, with the proportion of sales increasing from 27% to 83%, according to analysis by DYC Property Consultants.
In terms of price, the proportion of private homes priced below S$2 million sold in January outside the Central Region (OCR) doubled from 42% to 84% compared to December last year. This is due to tighter financing conditions and rising demand from buyers for relatively lower priced units.
With the gradual liberalisation of borders, the proportion of expatriates buying private homes rose to 9.2% in January, up from 8.3% in the previous month.
According to Mr Lan Zhenwen, Director of Research and Consulting at Eugene Tai Property Consultants, the proportion of expatriates buying private homes in Singapore will slowly increase in 2023, especially after the lifting of China's segregation policy, and demand for private homes in Singapore from mainland Chinese buyers will gradually recover in 2023.
Of the ten best-selling private residential projects in Singapore in January, six are in the Central Core Region (CCR), two in the Other Core Region (RCR) and the remaining two outside the Central Region (OCR).
Lan Zhenwen noted that the price pressure on these projects was significantly less in January.
Compared to the previous month, only three of these ten best-selling private residential projects saw their median transaction prices rise in January, while six projects saw their median transaction prices fall.
According to DYC Industrial Consulting, overall housing demand will slow down in 2023 due to rising loan costs in Singapore as a result of higher mortgage rates and tighter financing conditions.
Nevertheless, the performance of Singapore's labour market and healthy and stable household assets will continue to support Singapore's property market.
As private home sales slow down, the current supply and demand dynamics become more balanced, said Lan Zhen Wen.
Moreover, private home sales are expected to pick up gradually in the coming months, especially after the Lunar New Year, as more projects are set to open next.
With the introduction of the new Budget in 2023, the increase in Buyer's Stamp Duty (BSD) will affect residential units priced above S$1.5 million. This will encourage developers to keep property prices within reasonable limits.
In most cases, the increase in BSD is less likely to affect or deter home buyers and investors as most of them prefer flats priced at S$2 million or below.
Given the additional transaction costs, some potential buyers who want to purchase a luxury property may delay their plans to do so.
Dai Yuxiang Industrial Consulting predicts that this group of buyers will eventually enter the market, given the relatively high price attractiveness of high-end properties in Singapore. For buyers who are already affected by the additional buyer's stamp duty, the change in transaction costs is negligible.
With economic growth expected to slow this year and the economy hitting headwinds, Lan Zhen Wen believes that private property prices will increase by 1-3% in 2023, down from the 8.6% increase in 2022.