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Singapore’s home prices could remain ‘flattish’; rents may drop by 5% - 10% in 2024: Bloomberg Intelligence

Felicia Tan
Felicia Tan • 5 min read
Singapore’s home prices could remain ‘flattish’; rents may drop by 5% - 10% in 2024: Bloomberg Intelligence
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Singapore’s housing prices could remain “flattish” in 2024, says Bloomberg Intelligence analyst Ken Foong.

Along with the recent set of cooling measures introduced over the past few years, private housing prices moderated to a 1.4% increase q-o-q in 1Q2024, slowing from the 2.8% increase in 4Q2023, he notes.

The latest set of cooling measures was announced in April 2023. The changes saw Singapore citizens having to pay an additional buyer’s stamp duty (ABSD) of 20% from April 27, 2023, onwards, up from 17% at the time.

Foreign buyers saw their ABSD double to 60% instead of 30% previously.

To Foong, though demand is still supported by residential properties, which is seen as a hedge against inflation, price growth may be hindered due to uncertain macroeconomic conditions as well as interest rates, which seem to be higher for longer at the moment.

“Buyers are also being more selective when it comes to purchasing their own homes,” he notes.

See also: Hong Kong landlords pay bigger agent fees to fill empty offices

Within the rental market, housing rents could drop by 5% in the second half of 2024, culminating in a 5% to 10% drop for the full year. In his presentation, Foong attributes this to the higher vacancy rates that the market has seen so far.

Over the past six months, house rentals have declined by 4%, although this comes after a 57% increase from before the pandemic.

On this, Foong sees that rents could remain under pressure with more homes coming onto the market, adding that new home completions doubled on a y-o-y basis in 2023. The upcoming new home completions amount to around 8,000 to 9,000 units, he adds.

See also: S’pore 1H2024 home sales reach lowest in 20 years

With interest rates in Singapore stabilising as well as the narrowing of the gap between rental yields and mortgage rates which are both now at 3%, landlords may feel less pressure to increase rental rates to pay for their mortgage loans, says Foong.

Office rentals

Office rental rates could also remain flattish in 2024, with some downside risks in the second half of the year, notes the analyst.

During the 1Q2024, rents for Grade-A offices in the central business district (CBD) inched up by 0.4% to $11.95 psf, making this the 12th consecutive quarter of growth.

That said, with an upcoming supply of offices in the area and with macroeconomic headwinds, Foong sees that office rents could potentially drop by up to 2% in the 2H2024.

“We note that there’s upcoming supply, IOI Central Boulevard, which has achieved its first phase of temporary occupation permit (TOP) in April. It’s expected to achieve [its] full TOP by September. With this increase in supply, vacancy rates would go up and put some pressure on rents,” says Foong.

“That said, we think that a broad-based demand in offices would support IOI Central Boulevard [in] gradually filling the space up. It’s also the only major supply [coming onto the market] in the core CBD area up until 2025,” he adds.

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Retail spaces

Within the retail sector, retail malls are likely to see a “mild” growth in rental rates this year amid high occupancy rates, says Foong.

“We think that retail sales could rise by low-single-digit this year, supported by resilient household income and employment conditions in Singapore, partly the higher cost of living. So far in the first four months, we have seen retail sales up by 0.8%,” he notes.

While the upcoming supply of retail malls are expected to grow at a compound annual growth rate (CAGR) of 0.6% from 2023 to 2027, below the historical average between 2011 to 2019 with a CAGR of 1.5%, Foong sees that a large portion of the new supply will be located in residential catchment areas and integrated developments.

As such, he thinks that demand would gradually “soak up” this new supply.

Hospitality sector

Singapore hotels’ revenue per available room (RevPAR) could increase by 10% to 15% due to the recovery in tourism.

Some of the growth factors contributing to the potentially higher RevPAR include more meetings, incentives, conferences and exhibitions (MICE) and more events such as the recent spate of concerts that took place earlier this year, says Foong.

The introduction of visa-free travel between Singapore and China, as well as more dynamic offerings, could boost hotel rental rates.

“We think that visitor growth could hit the high end of the 10% to 21% forecasted by the Singapore Tourism Board (STB),” says Foong, adding that Singapore’s visitors were already up by 41% in the first four months of the year, partly boosted by the Taylor Swift concerts in March.

Data centres

Demand for data centres could be lifted by the recent trends such as generative artificial intelligence (AI), digitalisation, cloud deployment and 5G.

“Our tech analysts forecast that gen AI revenue could rise by a 41% CAGR from 2023 to 2032. Based on International Data Corporation (IDC) forecasts, cloud spending is expected to expand by 19.5% per annum from 2023 up until 2028,” says Foong.

Among the Singapore-listed REITs that have exposure to data centres, the analyst prefers CapitaLand Ascendas REIT A17U -

for its diversified portfolio. Another REIT which has a somewhat diversified portfolio compared to its peers is Mapletree Industrial Trust ME8U - (MINT), he adds.

While Keppel DC REIT also has a more diversified portfolio compared to Digital Core REIT, where most of its revenue comes from its top 10 tenants, the former has a current overhang from its Guangdong data centres in China. The issue will need some time to be resolved, the analyst notes.

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