URA 2Q24 real estate statistics

SINGAPORE, July 26, 2024 – The Urban Redevelopment Authority released statistics on the residential, office and retail property market for 2Q24 today.

Residential

Ms Chia Siew Chuin, Head of Residential Research, Research & Consultancy, Singapore

谢岫君, 私宅市场研究部主管 (新加坡)

Launches and new sales moderate

The primary home sales market was subdued in 2Q24. Developers remained cautious in timing their project launches amid buyers’ tentative buying sentiment and economic uncertainties. Developers launched just 634 new private homes (excluding executive condominiums or ECs) in 2Q24, 51.4% below the 1,304 units placed on the market in the preceding quarter and 73.3% lower year-on-year (y-o-y). In 1H24, launches slumped to a new half-year low of 1,938 units.

As launches slowed, new home sales in 2Q24 also moderated by 37.7% from 1,164 units in the previous quarter to 725 units. Y-o-y, new home sales plunged by 65.9%.

This brings the total developer sales tally in 1H24 to 1,889 units. This is 44.2% below the 3,383 units sold in 1H23 and 55.3% lower than the 4,222 units moved by developers in the same period in 2022. This is also the poorest half-yearly showing, plummeting below the 1,977 units sold during the height of the global financial crisis in 2H08.

The lacklustre new sales performance thus far in 2024 is due a lower launch volume. The low sales volume also shows that buyers have become more price-sensitive and discerning in light of an ample pipeline of new launches, the April 2023 cooling measures and elevated interest rates amid soft economic conditions.

In the secondary market, sale transactions improved by 36.7% from 3,066 units in the previous quarter to 4,190 units in 2Q24. More buyers seem to be turning to the secondary market as resale units are more affordable than new projects and seen as better value for their money by some. Buyers with immediate housing needs have also turned to the resale market as a means secure a home in a relatively shorter period of time.

Price gain slows further on falling sales volume and resistance higher price levels

Prices of private homes continued to increase at a moderated pace in 2Q24. The overall private residential price index rose by 0.9% quarter-on-quarter (q-o-q) in 2Q24, marking the second straight quarter of a slowdown in price increase from 2.8% in 4Q23 and 1.4% in 1Q24.

With this, prices have strengthened by 2.3% in 1H24, moderated from the gain of 3.7% in 2H23 and 3.1% in 1H23.

The underlying demand for private homes, healthy household liquidity, strong holding power and high home replacement costs all contributed to the sustained price increase in 2Q24. However, the price growth was reined in by a decline in total sales activity, as more expensive homes and persistently high interest rates prolonged market uncertainties, prompting prospective homebuyers to stay cautious and bid their time for more favourable conditions. This is particularly in light of the delay in interest rate cuts and growing price sensitivity among buyers.

The overall price growth was mainly driven by the landed market, bolstered by the aspiration of local buyers to upgrade, high construction costs and a limited supply of landed homes. However, the price increase decelerated for the second consecutive quarter to 1.9% q-o-q in 2Q24 after rising by 2.6% q-o-q in 1Q24.

The non-landed market witnessed different dynamics across the three market segments in 2Q24. Prices in the Core Central Region (CCR) edged down marginally by 0.3% q-o-q, following the 3.4% q-o-q rise in the previous quarter. Prices had adjusted after two quarters of continued growth, with demand from foreign homebuyers remaining under the weight of the increased Additional Buyer's Stamp Duty (ABSD) rate for foreigners. The absence of major price-leading new project launches in the CCR has also compounded the lack of interest during the quarter.

In the Rest of Central Region (RCR) home prices strengthen by 1.6% q-o-q. The modest price improvement can be attributed to the launch of The Hill @ One-North, where 43 units (approximately 30%) were sold at an average price of SGD 2,595 per square foot (sq ft) during its launch weekend.

In the Outside Central Region (OCR), prices inched up by 0.2% q-o-q in 2Q24, keeping pace with the gain in 1Q24. With the debut of only a few boutique-size projects, the dearth of major price-setting project launches in the OCR in 2Q24, resulted in the marginal price uptick. Furthermore, as homebuyers have become more selective and price-sensitive, this has capped the pace of price escalation. This is despite the underlying demand for upgrading from HDB households and the faster quarterly rise of 2.3% in the HDB resale price index in 2Q24.

In 1H24, prices in the CCR have appreciated by 3.0%, outperforming the gains of 1.9% in the RCR and 0.4% in the OCR. This suggests that suburban homes prices in the OCR might be reaching a threshold after recording an annual surge of 13.7% in 2023. In comparison, prices of non-landed private homes in the CCR and RCR increased by 1.9% and 3.1% in 2023, respectively.

The changes in URA’s price indices in 2Q24 are tabulated below.

URA Private Residential Property Price Index Q-o-Q Changes

Source: URA, JLL Research

Unsold inventory expands steadily for the third consecutive quarter but remains low

The total stock of unsold private residential units islandwide grew for the third straight quarter in 2Q24 to 20,758 units, up 2.7% q-o-q and 15.8% compared to 2Q23. The level of unsold inventory has been expanding steadily from the low of 14,333 units in 4Q21 but remains below the five-year pre-COVID quarterly average (2015-2019) of 26,930 units. The current level is also 45.1% below from the peak of 37,799 units in 1Q19.

Among the market segments, unsold stock in the CCR and OCR fell by 2.2% and 5.1%, respectively in 2Q24, while the RCR recorded a 17.3% increase mainly due to a significant rise in unsold units without pre-requisites for sale.

The steadily expanding total unsold stock suggests a gradual easing in the prolonged tight supply situation in the private residential sales market. The acceleration of the Government Land Sales (GLS) programme since 1H21 to increase land supply for the development private homes through the confirmed list has translated into more units available for sale. Based on an unsold stock of 20,758 units as of 2Q24 and an average annual new home sales tally of 9,288 units in the last five years, developers have about two years of landbank.

Developers have been highly prudent and selective when sourcing for land in light of tight profit margins, homebuyers’ cautious stance and prevailing market uncertainties. The GLS tenders for residential sites that closed in 2Q24 received lukewarm interest and measured bids from developers amid greater caution and perceived increased development risks. Meanwhile, the prolonged misalignment in pricing expectations between developers and sellers continues to prevent the successful conclusion of deals in the private residential land sales market. The tentativeness of developers is foreseen to persist over the rest of the year, keeping the residential land sales market muted.

Islandwide rental decline slows in 2Q24, pointing towards a potential stabilising of the leasing market

Islandwide private home rents fell for the third consecutive quarter in 2Q24, slipping by 0.8% q-o-q amid an expanding leasing stock and tenants’ lower threshold for high rents. However, the decline was slower than the 1.9% and 2.1% q-o-q declines recorded in 1Q24 and 4Q23, respectively. The moderation in the rate of decline suggests that rents could be stabilising.

Rents fell across the board for both landed and non-landed homes in 2Q24, though at varying degrees.

Rents of landed residential homes slipped 0.9% q-o-q in 2Q24, following the 4.2% q-o-q fall in 1Q24 and 4.1% q-o-q decline in 4Q23. The limited available stock of landed homes for lease coupled with sustained demand cushioned a steeper decline in rents in the quarter.

For non-landed homes, rents fell 0.8% q-o-q in 2Q24, moderated from the 1.6% decrease in 1Q24. Among the market segments, rents in the CCR held firm, easing just 0.1% q-o-q, markedly slower than the 1.6% q-o-q decline in 1Q24. Non-landed homes in the RCR and OCR also recorded slower declines in rents by 1.4% and 1.3% q-o-q, respectively, compared to the previous quarter. Notably, rents for non-landed homes in the CCR were the first to correct in 3Q23 when the leasing market started shifting in favour of tenants. The stagnated rental performance for CCR homes could suggest that the CCR leasing market is starting to stabilise.

Outlook

The planned launches of a number of major projects should see developers’ sales for 2H24 improve from the 1,889 units sold in 1H24. These projects include Sora (440 units), Kassia (276 units), The Chuan Park (916 units), Emerald of Katong (847 units) and The Collective at One Sophia (367 units).

However, until interest rate cuts materialise and economic conditions improve, prospective homebuyers are expected stay cautious and selective as they await the lineup of new project launches.

Barring unforeseen circumstances, JLL Research expects developers to sell 4,000 – 6,000 new units in 2024, lower than the 7,000 – 8,000 units initially anticipated and below the 6,421 units sold in 2023.

Still, private home prices which have risen by 2.3% in 1H24, are projected to increase by 3% to 4% in 2024, milder than the 6.8% increase in 2023. Although home prices have escalated significantly and buyers are now more resistant to higher price levels, there is potential for a moderate growth. The gradually expanding but still-low unsold inventory as well as the prevailing low unemployment rate and strong household liquidity should support price upsides. Developers are also expected to hold up prices due to higher land and construction costs committed for new projects. Selected new projects with appealing attributes might also have the potential to command higher prices.

In the leasing market, the completion of close to 9,100 private residential units (excluding ECs) for the rest of 2024 is anticipated to continue easing the supply crunch and promote a more stable market. Rents are anticipated to stabilise in the second half of the year, with the potential for a marginal upside towards the years’ end as the economy improves as projected and rent expectations align between landlords and tenants.

Office

Dr Chua Yang Liang, Head of Research and Consultancy, Southeast Asia

蔡炎亮博士, 研究与咨询部主管 (东南亚)

Bifurcated economic drivers shape office leasing

URA office rental index for the Central Region rebounded 3.1% q-o-q in 2Q24, exceeding the last peak in 2Q08. This rebound also follows a 1.7% contraction in 1Q24, despite weaker net demand and rising vacancy rates. The skittishness in the rental index also reflects the bifurcated economic forces driving office leasing.

Based on our analysis of the 2Q24 Business Expectations Survey by the Singapore Department of Statistics, there is an apparent bifurcation in the services sector. According to that survey, Infocomm, Finance & Insurance companies collectively have a net weighted positive 18% who have a stronger, more positive outlook on their revenue forecast in 2Q24 as compared to a net weighted negative 10% of Real Estate and Professional Services firms, which expect revenue to be weaker. This divergence in expectations could have underscored the unpredictability in the rental index.

Overall, these firms collectively have a net weighted positive 15% who are more optimistic over their business prospects in the immediate term into September. We reckon this could provide some lift to the occupier demand in the office sector despite the incoming supply pipeline.

Supply over the next 12 to 18 months remained significant with Keppel South Central (0.6 million sq ft) and the redeveloped Shaw Tower (0.4 million sq ft) on track for completion in 2025. Adding on the uncommitted spaces at IOI Central Boulevard Towers, there could still be over 1.5 million sq ft of new quality office space competing for occupiers.

The office market is also grappling with the need to backfill the spaces that some larger floorplate occupiers plan to relinquish as part of their corporate restructuring. These include Meta’s space at South Beach Tower, expiring in September this year, as well as BNP Paribas’s space at Ocean Financial Centre when their lease expires at the end of this year.

This recent rebound in rent is also in line with JLL research data which showed that gross effective rent for Central Business District (CBD) Grade A office space is still expanding albeit decelerated from 1.4% q-o-q in 1Q24 to 0.7% q-o-q in 2Q24. This slower rental growth comes shortly after office rents exited two-quarters of rental contraction in 1Q24. Based on JLL data, rents climbed to SGD 11.50 per sq ft per month in 2Q24, which is 25% shy of the historical peak of SGD 15.27 per sq ft per month recorded in 2Q08.

Outlook

Rent growth should remain soft, especially given the weakness in Europe and China and the geopolitical and looming uncertainty associated with the outcome of the US election this year. Many market watchers expect Trump’s recapturing of the White House to lead to a higher interest rate environment. Trump’s trade protectionism and the Republican's general preference for lower taxes could heighten inflationary risks and potentially delay the much-anticipated Fed rate cut.

Dr Chua Yang Liang, Head of Research and Consultancy for JLL Southeast Asia, comments, “Persistent conflicts in the Middle East and Ukraine, as well as the lingering trade friction between China and the US, which is likely to heighten, have cast a long shadow over the office market recovery in Singapore.

As a global financial market and a gateway to ASEAN, the Singapore office market is at an inflexion point. On the one hand, the uneven global growth and new working arrangements have brought down the demand for office spaces. Yet, ASEAN is benefiting from the trade friction between China and the US, and Singapore could expect an uplift in demand from firms here looking to capitalize on this regional growth trend.”

Dr Chua further states, “The primary challenge facing the Singapore office market is navigating the near-term supply pressures. These pressures pose a counterbalance to the increasing rent expectations of landlords in buildings with high occupancy rates, thereby keeping rent growth modest for the rest of this year. For older and functionally obsolete stocks, there is so much opportunity for asset positioning and enhancement awaiting them. The upside demand from firms looking to capitalise on the ASEAN growth story is further sweetened by the rejuvenation incentives that the urban planners have introduced.”

Retail

Ms. Angelia Phua, Consulting Director, Research and Consultancy, Singapore

潘慧菁, 顾问董事, 研究与咨询部(新加坡)

The broader retail property market remains stable

The URA statistics released today showed that the retail property market displayed resilience and remained largely on track for recovery, despite macroeconomic headwinds.

In 2Q24, resilient occupier demand and moderated supply drove retail vacancy rates lower. URA’s islandwide vacancy rate declined 0.1 percentage points q-o-q to 6.6% in 2Q24, reversing the marginal increase of 0.2 percentage points q-o-q in 1Q24, led by a 0.7 percentage point q-o-q decline in the vacancy rate in the Rest of Central Area in the Central Region to 8.8% in 2Q24. The vacancy rate in the overall Central Region remained stable on a q-o-q basis, at 7.7% in 2Q24.

We continued to observe strategic expansion by retailers in the broader retail market across diverse trades, led by food and beverage, active lifestyle/sports-related operations and beauty and wellness establishments. The opening of Pasir Ris Mall in June 2024 with a healthy pre-commitment rate further attests to the healthy occupier demand for retail space.

In 2Q24, the line-up of new store openings included Hoka, a US sportswear brand, which opened in ION Orchard, and Toebox, Korea’s leading kids clothing brand, which opened in Wisma Atria. At Marina Square, the BHG Select pop-up and a multi-brand retail concept specialising in outdoor and sports gear, Liv Activ, opened at the mall, taking up spaces vacated by Zara and North Face, respectively.

In the Outside Central Region, doughnut chain Mister Donut expanded its presence with the opening of two additional outlets, one at Jurong Point and one at Northpoint City. Tampines Mall refreshed its F&B offerings with the addition of Yang Guo Fu Mala Tang, Lao Huo Tang and Tanjong Rhu Pau (kiosk space), as well as enhanced its beauty and wellness offerings with the opening of IVI Aesthetic Clinic and Spacio TCM Wellness.

Retail rents remained flat in 2Q24 on stabilising vacancy rates in the Central Region. URA’s retail rental index in the Central Region remained unchanged q-o-q in 2Q24, following two consecutive quarters of declines. The uncertain economic outlook, which led landlords to compromise on rents and prioritise occupancy rates, likely capped rent growth and resulted in rents remaining stable in 2Q24.

Retail asset prices dipped in 2Q24, despite rents remaining fairly stable. The URA price index in the Central Region fell 1.2% q-o-q in 2Q24, reversing four consecutive quarters of increases. The elevated interest rate environment that raises funding costs has led to investors’ cautionary stance, which likely accounted for the soft retail property prices in the quarter.

Outlook

We maintain our view that the retail property market should continue to attract new brands and encourage strategic expansion from existing retailers in Singapore due to sustained domestic consumption amid a tight labour market and tourism growth.

The pipeline of business travel and meetings, incentive travel, conventions and exhibitions (BTMICE), along with improved flight connectivity and capacity, and the mutual 30-day visa exemption arrangement between Singapore and China, should further boost the tourism recovery on both the business and leisure fronts.

Singapore's role as a strategic gateway, where new retailers can build a strong presence and establish an international reputation before expanding in the region, also drives occupier demand for retail space.

Based on JLL Research’s retail asset portfolio, the moderated supply pipeline and firm occupier demand are expected to drive vacancy rates lower for the rest of 2024. Coupled with landlords’ proactive asset management, this is expected to extend the rent growth of quality retail assets from 1H24 to 2H24. We maintain our view that rents for prime floor space should grow by 1.5 – 2.5% y-o-y in 2024.

With market liquidity and a scarcity of tradeable quality retail assets, rising rents should extend the price growth of prime floor space in quality retail assets from 1H24 to 2H24 and, hence, full-year 2024.