Low Hopes on prime home, office, biz park sector for Agents
OVERALL sentiment in Singapore’s real estate market improved during the initial quarter of 2024, but industry players have turned markedly more pessimistic on the prime residential sector, along with the office and high-tech business park and space.
Real estate professionals polled by the Institute of Real Estate and Urban Studies (Ireus) of the National University of Singapore (NUS) identified major economic indicators pointing to increased growth, a low unemployment rate and the easing of core inflation as reasons for overall improved sentiment.
Yet, survey respondents were significantly more negative than they were positive regarding prospects for the residential prime segment.
We are concerned about a possible excessive supply of residential apartments as the government increases government land sales in the past couple of (quarters). There is a possibility that cooling measures are always a worry.
The outlook for the premier residential sector is still subdued. The Stamp Duty Additional Buyer’s still impacts demand from foreign buyers and investors.
The cost of private residential properties increased 1.4 percent during the first quarter of 2024. It was less than the 2.8 percent increase in the fourth quarter of 2023. The latest figure is also the slowest quarterly gain since the Q3 of 2021.
Real estate agents didn’t anticipate developers to delay or reduce the launch of new projects, but they expected them to raise prices.
In Q1 22.2% of respondents predicted that prices for unit units of new launches will be slightly higher over the next six months, down from 42.9% in the previous quarter. However, 72.2% of them believed that prices would remain similar. This is an increase from 47.6% in the previous quarter.
Only 5.6 percent of those who own homes were expecting prices to be somewhat lower.
Ireus found that 27.8 percent of respondents anticipate a moderately higher or substantially more units over the upcoming half-year dropping by 29 percentage points from Q4 2023. However, 72.2% of respondents anticipate that the number will remain the same. This is a significant improvement over the previous quarter’s 42.9 percent.
No one surveyed thought that the number of units that were created would fall.
Homebuyers are becoming more sophisticated and resistant to price hikes despite the fact that there are many new projects. Developers are expected to adopt sensitive pricing strategies, major price adjustments are not likely because of the fact that they have previously committed land and development costs.
The healthy balance sheets of households and the prevailing low unemployment levels are expected to keep boosting price and demand.
Ireus The company that conducts this quarterly survey, revealed that respondents were among the most optimistic about the future for the hotel/serviced apartments sector. The optimism was further boosted by the strong arrivals of tourists and the receipts that they earned.
Industry professionals were also more favorable than negative on suburban retail as well as the industrial/logistics business.
Ireus said that the future sentiment index, which reflects sentiment for the next six-month period, has reached 5.1 points, which is above neutral, for the first five consecutive months.
The current sentiment indicator that measures the mood for the last six months, was up by 4.7 from 4.4 the previous quarter. The mood has improved over the last six months. The index has risen from a score of 4.2 in Q3 2023 and climbed to 4.4 at the close of last year.
Overall, Singapore’s macroeconomic indicators are doing well with no unexpected surprises. These indicators, if they do not happen suggest a strong economy that is likely to recover in the coming year.
According to the Q1 update from the Ministry of Trade and Industry The economy grew by 2.7 percent on an annual basis during the first quarter of this year than the 2.2 percent growth recorded the previous quarter. The growth forecast for 2024 is between 1 to 3 percent.
The positive mood in Q1 was due in part to a robust Singapore dollar that has helped to reduce inflation.
In the residential sector, in which industry professionals were the most pessimistic, responses showed the future balance was minus 44%, compared to less than 18% in the preceding quarter.
The office sector along with business parks were also a bit pessimistic.
This is similar to URA’s numbers which revealed that the index of office rentals decreased by 1.7 per cent for the central region in the first quarter of 2024 after climbing 27.5 per cent over nine quarters.
The rise in the quarter-on-quarter rate of 0.3% at the end 2023 is a stark contrast to the 0.3 percent growth in quarterly revenue in the present.
Work-from-home arrangements dampen office morale and promote a drive for quality in firms.
Although a slowdown in world economy was the most significant risk to watch again, slightly fewer flagged it – about 73.5 percent of respondents compared to 89.5 per cent during last quarter. Another 55.9 percent of respondents in Q1 mentioned the deterioration of the domestic economic outlook as a key risk factor. This is in contrast to 57.9% in Q4 of 2023.
Concerns over rising inflation/interest rates ranked third among the most risky risks, with 50 per cent, up from 44.7 per cent in Q4.
In Q1, property executives cited the tightening financing/liquidity on the market for loans that increased from 42.1 percent in the previous quarter to 47.1%. The increased supply of new development land also raised worries, ranging from 23.7 percent in Q4 to 29.4 percent in Q1.
In Q1 respondents expressed less concern regarding the cost of construction, numerous residential launches, and the government’s efforts to cool down the market.
The risk of a real estate inflation rate was the lowest increasing to 2.9 per cent in Q1 from 2.6 per cent in the fourth quarter.
In Q1, respondents noted labor and land as their top concerns over the next six months, with 22.2 percent each. Finance (16.7 percent) and building material (11.1 percent) were the other issues respondents cited as being of concern.
The Real Estate Sentiment Index is the result of a study among top executives who are involved in Singapore’s real estate and development industry, and includes developers, consultants as well as financial institutions, service companies and professional firms.
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