Singapore property buying sentiment slides in 1Q2023 amid high interest rates and cooling measures: NUS

Property buying sentiment in Singapore has taken a dive, according to the latest Real Estate Sentiment Index (RESI). Published by NUS, the index dropped from 5.1 in 4Q2022 to 4.6 in 1Q2023. This decline can be attributed to several factors, including successive rounds of property cooling measures, high interest rates, and a banking crisis in some Western countries.

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Professor Qian Wenlan, director of Institute of Real Estate and Urban Studies (IREUS) at NUS commented: “In tandem with the December 2021 property cooling measures, and with the US Federal Reserve giving no indication of letting up on interest rate hikes, sentiment has been on the downtrend since early 2022. The most recent round of cooling measures and the ongoing banking crisis in the West has further raised caution, and our latest sentiment indices have hence further dipped.”

Despite this downturn, IREUS pointed to the resilient performance of the URA’s property price index – a result that seems counterintuitive when considering the global economic situation and local market conditions. Additionally, recent new launches have seen keen buying interest, even with increases in the Additional Buyer’s Stamp Duty (ABSD).

Qian went on to explain: “We can expect to see a lead-lag effect between policy implementation and its associated effects on the market. The new launch market is starting from a relatively low base this year, and the “heady” performance last quarter is modest compared to previous peaks.”

When polling developers, caution was expressed amid headwinds and uncertainty. Around 41% of developers expected a moderately or substantially higher number of units to be launched over the next six months. Qian concluded: “Amid the rising cost of debt funding and other headwinds, buyers will progressively become more price-sensitive, while some demand may be shifted to public housing as the government expands the HDB supply pipeline.”