Private home market to achieve price-supply ‘balance’ in 2024: analyst

But the pricing gap between the primary and secondary market may widen, Knight Frank's Leonard Tay warned.

Singapore’s private home market is expected to continue on towards the path of stability amidst moderating demand and as supply catches up, according to Knight Frank.

Balance is expected to be achieved sometime in 2024, thanks in part to an expected supply of 10,000 private homes that will hit the market over the next 12 months. This, in turn, would lead to a more moderate price growth during the year, Knight Frank’s research head Leonard Tay said in a commentary.

Overall, in 2024, private home prices are projected to grow by a more moderate 3% to 5% in 2024, against the 6.7% (flash estimates) increase in 2023.

However, private home prices in the new launch market are expected to remain elevated, driven up by committed land and construction costs. This was also the main element that pushed up prices by 4.2% in the core central region (CCR) in Q4 2023, due to sales from Watten House.

High prices for newly launched private homes in the outside central region (OCR) is also expected. For example, non-landed home prices rose 4.6% in Q4 2023, driven up by sales of J’den in Jurong East, which launched in November.

This dynamic might result in two-tier pricing with the gap between the primary and secondary market widening in 2024, Tay warned.

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Meanwhile, inventory of landed homes will continue to remain limited. Evergreen demand for freehold landed homes is expected to remain in 2024, with Tay noting that Singaporean homebuyers are willing to move out of familiar locations for a chance to live in a landed property.

In Q4 2023, landed home prices rose 4.5%, reversing the 3.6% price decrease in Q3 2023. This translated to an increase of 7.8% for the whole of 2023. 

“General demand for private homes in the months ahead will remain underpinned mostly by homebuyers purchasing for their own occupation, even as these buyers take a longer time to consider in light of factors such as cooling measures, sticky high interest rates, job security, inflationary and recessionary pressures,” Tay said.

Although household balance sheets are healthy, homebuyers have been and will continue to be circumspect in their housing decisions, targeting locational and product attributes that best fit their lifestyle and family requirements, such as schools, he added.

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Meanwhile, residential investors purchasing for capital preservation, appreciation, and recurring income, both locals and foreigners, will likely remain on the sidelines until interest rates peak, stabilise, and perhaps reduce, Tay noted. 

“Nonetheless, history has shown that experienced investors familiar with Singapore’s private residential scene are quick to react when windows of subdued activity turn with the return of transactional activity,” he added.