Singapore Real Estate 2024 Outlook

As 2024 dawns, Singapore’s real estate market, a vibrant and ever-evolving force, stands on the threshold of exciting new trends.

• Key Trends and Predictions for 2024
• Landlords, Tenants, and Higher Occupancy Caps
• Shift in Home Loan Preferences
• Revival of Interest in Ageing Mixed-Use Properties
• Bargain Hunting in the Central Core Region (CCR)
• Potential Strategies for HDB Upgraders and OCR Project Investors
• Personalized Real Estate Advice

Overview of Expected Trends in the Singapore Real Estate Market for 2024

Evolving Occupancy Dynamics: One of the most notable changes is the increased occupancy caps for residential properties. This regulatory adjustment is set to alter the dynamics between landlords and tenants significantly. The ability to house more tenants per property could lead to innovative living arrangements and a reshaping of rental economics, particularly in high-demand areas.

The CCR’s Bargain Wave: The Central Core Region (CCR) is expected to become a hunting ground for value-seekers. After enduring market pressures in the previous year, the CCR could offer attractive opportunities for investors and homebuyers, especially with an increased supply of units expected to enter the market.

Customized Real Estate Strategies: Finally, the diverse and complex nature of these trends underscores the importance of personalized, data-driven real estate advice. Investors, homeowners, and tenants alike will need to navigate these waters with tailored strategies that align with their unique circumstances and goals.

Home Loan Landscape Transformation: The anticipated departure from fixed-interest home loans in response to global and local economic factors will redefine the borrowing landscape. As the effects of rate cuts begin to materialize, a strategic shift towards variable-rate loans could become more pronounced, influencing both new borrowers and those seeking to refinance.

Stabilizing Prices Amidst Supply Resolutions: The property market is likely to experience a stabilization in prices as the supply crunch eases. With a significant number of new units slated for completion, the market could see a more balanced demand-supply equation, potentially dampening the rapid price escalations witnessed in previous years.

Rising Star of Ageing, Mixed-Use Properties: 2024 is poised to witness a renewed interest in ageing, mixed-use developments. This trend, spurred by significant redevelopment projects like the Golden Mile Complex, is likely to elevate the appeal of similar properties. Such developments offer unique opportunities for rejuvenation and could become hotspots for both commercial and residential interests.

Proximity to MRT: A Growing Priority: As lifestyles continue to evolve, the demand for properties near Mass Rapid Transit (MRT) stations is anticipated to surge. This trend is likely to be fueled by rising transportation costs and a growing preference for convenience and connectivity, making properties near MRT stations highly sought after.

A. Explanation of Changes to Occupancy Caps

In a significant policy shift, Singapore’s real estate regulations have adjusted the occupancy caps for residential units. For 4-room or larger flats, the number of unrelated tenants allowed has increased from six to eight. Similarly, private properties with a size of 90 square meters or more can also accommodate up to eight unrelated tenants. This change is a pivotal move in the housing policy, aimed at maximizing the utility of living spaces in the land-scarce city-state.

Related: Rental occupancy cap relaxed for HDB, private properties to cool home leasing market | The Straits Times

For Landlords: This new policy opens up lucrative avenues for landlords. With the ability to accommodate more tenants, landlords can potentially increase their rental income. This is especially beneficial for those owning larger properties, as they can now leverage the additional capacity to cater to a broader tenant base.

For Tenants: Tenants, particularly those looking for shared accommodations, stand to benefit from more affordable options. With landlords able to house more individuals, tenants might find it easier to secure accommodation in their desired locations at a potentially lower cost per head.

Shift in Rental Preferences: The increased occupancy cap is likely to shift rental market preferences. Tenants may lean towards larger apartments that offer the dual benefits of affordability and space, particularly in high-demand areas.

Market Softening Impact: As noted in the 2023 market trends, the rental market was showing signs of softening. The increased occupancy cap could further influence this trend, as the supply of rental spaces increases. This may lead to tenants having more bargaining power and options, potentially keeping rental rates in check.

Rental Price Adjustments: While the potential for increased rental income exists, the overall effect on rental prices will be nuanced. A larger supply of rentable space might lead to competitive pricing, especially in areas with a high density of eligible properties.

Investment Strategies: Investors in the rental market will need to recalibrate their strategies. Properties that can be efficiently converted to accommodate more tenants or those already meeting the new occupancy standards might become more desirable.

A. Historical Context of Interest Rates Post-COVID-19

The landscape of home loan interest rates in Singapore has been significantly shaped by the economic repercussions of the COVID-19 pandemic. In response to the pandemic’s economic impact, central banks worldwide, including the U.S. Federal Reserve, implemented aggressive interest rate hikes to stabilize economies. This led to a parallel increase in home loan interest rates in Singapore.

Emerging Preference for Variable-Rate Loans: As the market anticipates rate cuts, there is likely to be a noticeable shift from fixed-interest home loans to variable-rate options. Borrowers may find variable-rate loans more attractive due to their potentially lower costs in a decreasing rate environment.

Refinancing Trends: Existing borrowers who had locked in fixed-rate loans during the high-interest period might consider refinancing to variable-rate loans to capitalize on the declining rates, potentially leading to substantial cost savings over the loan term.

Decision-Making for New Borrowers: Prospective homebuyers entering the market in 2024 will need to carefully evaluate their loan options. With the prospect of declining interest rates, choosing the right type of loan could significantly impact their long-term financial planning and affordability.

Impact on Real Estate Investment: For real estate investors, the changing loan landscape could alter the calculus of property investments. Lower borrowing costs may improve the attractiveness of real estate as an investment class, particularly in a market adjusting to new occupancy and property trends.

Broader Market Effects: The shift in home loan preferences could have broader implications on the real estate market, including potential increases in property demand and prices. However, this trend needs to be balanced against other market dynamics, such as the supply of new housing units and regulatory changes.

Golden Mile Complex: Once a subject of redevelopment debates, this iconic building has seen a revival of interest. Far East Organization, Sino Land, and Perennial Holdings acquired it for $700 million, marking a significant milestone. This redevelopment is not just about the transformation of an aging building but also about preserving a piece of Singapore’s architectural heritage while adapting it to contemporary needs.

Peace Centre/Peace Mansion: This property, historically viewed as less appealing despite its prime location, is undergoing a similar transformation. Once known for its run-down state and less savory reputation, its redevelopment represents a shift in how aging, mixed-use properties are perceived and valued in urban centers.

Renewal of Older Mixed-Use Developments: The success of projects like Golden Mile Complex and Peace Centre/Peace Mansion could trigger a trend in rejuvenating other aging mixed-use properties. Buildings like Orchard Towers or Sultan Plaza, which have potential due to their location and mixed-use nature, might attract developers’ interest in similar transformation projects.

Opportunities for Developers: There’s a growing recognition that these older properties, often situated in prime locations, offer untapped potential. Developers might view them as opportunities for profitable redevelopment projects that can cater to modern commercial and residential needs.

Community and Cultural Impact: Revitalizing these properties can have a positive impact on surrounding communities, potentially leading to urban renewal and cultural preservation, contributing to the city’s diverse urban tapestry.

Boost in Property Values: Successful redevelopments of aging mixed-use properties can lead to an increase in property values in the surrounding areas. This can create a ripple effect, enhancing the appeal and worth of neighboring properties.

Influence on Investment Trends: Positive outcomes from these redevelopment projects can shift investment trends, with more investors and developers considering similar aging properties as viable investment opportunities.

Attracting New Demographics: Redesigned mixed-use properties can attract different demographics, including younger professionals and businesses, thereby diversifying the resident and tenant mix and revitalizing the community.

Regulatory and Policy Considerations: The trend towards revitalizing aging mixed-use properties may lead to changes in urban planning and development policies, encouraging sustainable redevelopment while balancing historical preservation.

Modest Gains: In 2023, the Central Core Region (CCR) of Singapore experienced relatively modest gains compared to other regions. Despite its prime location and high-end properties, the average increase in property values stood at a mere one percent. This was in stark contrast to the double-digit growth seen in other parts of Singapore.

Impact of New Cooling Measures: The introduction of new cooling measures, particularly the doubling of Additional Buyer’s Stamp Duty (ABSD) rates for foreigners to 60 percent, significantly impacted the CCR. These measures primarily affected foreign buyers, who form a substantial portion of the CCR’s investor demographic.

Larger Inventory: Reports indicate that around 2,968 new units are expected to enter the CCR market in 2024, marking the largest influx of new supply in the region since 2021. This increase in inventory is likely to influence market dynamics significantly.

Price Adjustments: The combination of heightened supply and recent cooling measures could lead to a downward adjustment in prices. This may create a buyer’s market, with more options available at potentially lower price points.

Attractive Deals for Home Buyers: For individuals looking to purchase homes in the prime CCR, 2024 could offer attractive opportunities. The potential softening of prices may make high-end properties more accessible to a broader range of buyers, including those who previously found the CCR market prohibitive.

Strategic Acquisitions: Buyers with a keen eye for value and the ability to act swiftly could benefit from strategic acquisitions in the CCR. The expected softening of the market might result in short-term opportunities to secure properties at bargain prices.

Investment Potential: Investors could find value in the CCR market in 2024. With the possibility of acquiring premium properties at lower prices, the region may offer lucrative investment opportunities, especially for those betting on the long-term appreciation of prime real estate.

Rental Market Considerations: Given the high-end nature of the CCR properties, the rental market in this region might also adjust. Investors could capitalize on potential rental income opportunities, especially if the purchase prices are favorable.

Increased Supply: In 2024, the Singapore real estate market is expected to see an influx of new units, with projections ranging from 8,000 to over 11,000, far surpassing the approximately 7,500 units in 2023. This increase is primarily due to the completion of various residential projects.

Balancing Demand: The significant rise in housing supply is set to meet the robust demand that has persisted, particularly post-COVID-19. The demand has been driven by various factors, including low interest rates and a stable economic recovery.

Equilibrium Achieving: The interaction between the increasing supply and steady demand is likely to lead to a more balanced market. This equilibrium is crucial for maintaining sustainable growth in the property sector.

Moderation of Price Growth: The increased supply is expected to moderate the rapid price growth witnessed in previous years. While a drastic price drop is unlikely, considering developers’ costs and well-capitalized sellers, the pace of price increases is anticipated to slow down.

Market Segment Variations: Different market segments might experience varied impacts. While the Central Core Region (CCR) might see more significant adjustments, the Outside Central Region (OCR) and the Rest of Central Region (RCR) could have different dynamics, influenced by their respective supply and demand conditions.

Exploring Resale Market: With stabilizing prices, HDB upgraders might find better deals in the resale market, especially for larger and older units that offer more space at competitive prices.

Considerations for Location and Size: Upgraders should weigh the location and size of the units, balancing their family needs and budget constraints.

Capitalizing on Demand for Suburban Areas: Investors in OCR projects could benefit from the sustained demand for properties in suburban areas, particularly those well-connected by public transport or near amenities.

Focus on Long-Term Value: Given the stabilizing prices, investors should focus on long-term value appreciation and rental yield, rather than short-term gains.

Market Diversification: Both upgraders and investors might consider diversifying their property portfolio, exploring different regions and property types to mitigate risks associated with market fluctuations.

Increased COE Rates: In Singapore, the Certificate of Entitlement (COE) rates, which grant the right to vehicle ownership, have seen record highs. This increase has made car ownership significantly more expensive for the average resident.

Rising Cost of Living: Alongside the spike in COE rates, the overall cost of living in Singapore has been on the rise. Factors like increased Goods and Services Tax (GST) rates and general inflationary pressures are contributing to this trend.

Shift in Transportation Preferences: These economic factors are driving a shift towards public transportation as a more affordable and practical alternative to owning a car. Consequently, properties near Mass Rapid Transit (MRT) stations are becoming increasingly desirable due to the convenience and cost-saving benefits they offer.

J’den and Reserve Residences: These condominium projects, known for their direct connections to MRT stations, have experienced high take-up rates. Their success, even amidst the implementation of cooling measures, underscores the growing preference for properties with easy access to public transit.

Other Successful Developments: Similar trends have been observed in other projects situated near MRT stations, indicating a broader market preference for such locations. These developments often command a premium due to their convenience and accessibility.

Introduction of HDB Plus Model Flats: The Housing & Development Board (HDB) has introduced Plus model flats, designed to offer enhanced living experiences. The first of these, located in the Bayshore area, is notable for its proximity to an MRT station.

Impact on HDB Market Dynamics: The introduction and potential success of Plus model flats near MRT stations could influence future HDB developments, with a possible shift towards building more such flats in prime locations to meet rising demand.

Appeal of Plus Model Flats: These flats are likely to be highly sought after due to their strategic locations and modern amenities. The demand for these units could reflect a wider trend towards prioritizing accessibility in residential choices.

Long-Term Considerations: Potential buyers of these flats might consider factors like the Minimum Occupation Period (MOP) and eligibility requirements, weighing them against the benefits of living in well-located, modern HDB units.

Individual Needs and Goals: Real estate decisions are significant and highly personal, varying greatly from person to person. Tailored advice is crucial as it takes into consideration individual financial situations, long-term goals, lifestyle preferences, and risk tolerance.

Risk Mitigation: Every real estate investment comes with its set of risks. Customized advice can help identify and mitigate these risks, aligning choices with one’s comfort level and investment strategy.

Navigating Market Complexity: The real estate market is complex and ever-changing, with myriad factors influencing property values and investment viability. Personalized advice helps in navigating this complexity, ensuring that decisions are based on the most relevant and current information.

Maximizing Value: Tailored advice aims to maximize the value of the investment or purchase by considering factors like market trends, location benefits, future developments, and property potential.