Singapore housing supply will face decline in 2024: Only 10,000 new homes expected

SINGAPORE: In a recent report by OrangeTee Research, it has been revealed that the Singapore housing supply will face a decline in 2024, as reported by Real Estate Asia on Tuesday, Nov 28. Singapore’s private rental market has experienced a notable slowdown in the latter half of 2023, particularly in the luxury housing sector. The report attributes this decline to the substantial increase in rent prices witnessed over the past two years, driven by a combination of limited housing supply and robust local demand during the pandemic.

The housing landscape saw a significant boost in supply, with approximately 28,600 new private residential properties completed between 2022 and 2023, excluding executive condominiums (EC). However, this surge in supply appears to have taken a toll on the rental market, coinciding with a sharp contraction in domestic demand as many locals exited the leasing market after securing new homes. Looking ahead to 2024, the report projects a considerable drop in housing supply, with only around 10,000 new homes expected to be completed.

The majority of these upcoming completions, approximately 4,100 units, are slated for prime areas in the Core Central Region (CCR), while slightly over 3,900 homes will be finished in the city fringe or Rest of Central Region (RCR). Landlords in the city fringe areas may face heightened competition for tenants, as nearly 16,000 new homes are set to be completed from 2022 to 2024. Similarly, the luxury segment in CCR will see around 7,700 new completions during the same period.

Anticipating changes in demand dynamics, the report suggests that more foreigners might turn to renting private homes in prime locations, driven by a hefty 60% Additional Buyer’s Stamp Duty (ABSD) if they choose to purchase residential property. This increased foreign demand could potentially offset a sharp rental correction in the CCR. Moreover, the supply of CCR homes is expected to decline more steeply after 2024 compared to RCR and OCR.

Conversely, rental prices in the suburbs, categorised as Outside of Central Region (OCR), may experience an upward trajectory due to a decrease in home supply. The number of completions in OCR is projected to fall significantly from around 10,000 units in 2023 to approximately 1,800 units in 2024.

Looking at the bigger picture, the rental price growth is expected to decline from the notable 29.7% increase observed in 2022 to approximately 12% to 14% in 2023, further slowing to 2% to 5% in 2024. As domestic demand for rental properties continues to diminish, the overall rental transactions are anticipated to dip below the 10-year average of 81,474 units, reaching around 75,000 to 80,000 units in 2023 and an estimated 70,000 to 75,000 units in 2024. This shift indicates a changing landscape in Singapore’s housing market, with potential implications for both landlords and tenants alike./TISG