Positive Market Fundamentals Bolster Resilience
According to a seminar organized by the Real Estate Developers’ Association (Redas), Singapore’s private residential market is underpinned by strong fundamentals that point to continued resilience. Knight Frank’s head of research, Leonard Tay, noted that despite current geopolitical and trade tensions, the market has historically weathered numerous regional and global downturns, with private home prices growing nearly eightfold since 1980. This resilience was particularly evident over the last eight years, during which prices increased by over 55 percent despite new cooling measures and the challenges of the pandemic. Key drivers of this strength include rising household affluence, with liquid assets now exceeding S$1 trillion, and low unemployment rates that have not surpassed 3.6 percent in three decades. The easing of interest rates is also contributing to increased liquidity, bringing potential homebuyers who were previously on the sidelines back into the market.
Affordability Challenges and Market Nuances
While the market shows resilience, affordability remains a key concern, particularly in the new home sector. A separate Knight Frank study revealed that the median price of new private homes in 2024 was nearly 19 times the median household income, a significant jump from 11.8 times in 2019. This increase was driven by a combination of pent-up demand during the pandemic, limited housing supply, and developers aggressively bidding for land, which in turn led to higher construction costs. In contrast, the private resale market has maintained a more consistent price-to-income ratio over the past 15 years, suggesting that more affordable options may be available for buyers. Knight Frank pointed out that new sales have been the primary driver of overall price growth over the last five years. However, the cost of property ownership, including higher property taxes, has also increased, prompting some homeowners to re-evaluate and right-size their real estate portfolios.
Outlook for Public Housing and Overall Market
The public housing sector also faces its own affordability concerns. Knight Frank noted that the average resale price-to-income ratio for Housing & Development Board (HDB) homes has been on a steady climb since 2019. While HDB homes remain “much more affordable” compared to non-landed private properties, their prices continue to rise and are showing signs of approaching the all-time high recorded in 2013. The consultancy’s survey found that price growth and affordability are the top priorities for most Singaporean homebuyers. Although price growth has slowed and has been managed by government measures, affordability remains a pressing issue, particularly for younger buyers and those looking to upgrade. This challenge could be exacerbated if Singapore were to enter a recession with accompanying job losses, which would likely cause a fall in transaction volume as buyers retreat to defensive positions.
