Calmer waters ahead

Singapore’s private residential market continues to benefit from the city’s safe-haven reputation amid geopolitical tensions attracting expats, wealthy investors, and new businesses. Younger generations seek their own apartments, creating additional housing needs. Despite strong demand for living space, the housing market has left overvalued territory and we newly classify it as fairly valued.

Rental growth has been accelerating since 2021 and is outpacing home prices by now. Currently, tenants pay almost 25% higher rents than a year ago, the highest inflation-adjusted increase among all cities analyzed. In contrast, price dynamics in the private market have slowed down in recent quarters and house prices increased by only 3% in inflation-adjusted terms between mid-2022 and mid-2023. That said, we expect rents to soften going forward, as supply constraints induced by pandemic lockdowns ease and physical housing completions grow. Rental demand should also moderate as the bulk of post-pandemic international relocations is now behind us.

The housing market cooling measures introduced in recent years are starting to take effect. Stamp duties for foreigners have been raised to 60%—the highest globally—significantly curtailing foreign demand. Also locals are contending with tighter policies: Lower loan-to-value ratios, tighter debt servicing ratios, and rising mortgage rates have dampened both demand and affordability. Going forward, we expect home price growth to moderate and rents to fall as housing supply ramps up and demand stabilizes. Buy-to-let investors must keep regulatory risks in mind, as the government has not ruled out rental market regulations in the future.

Source: ubs-global-real-estate-bubble-index-en-pdf  – page 20