Singapore Central Bank Sees Home Prices, Rents Cooling as Housing Supply Grows

The central bank of Singapore sees home price and rent growth slowing over the near term as demand cools and the government continues add more residential sites to the development pipeline.

In this year’s Financial Stability Review, the Monetary Authority of Singapore (MAS) said price pressures in the closely-watched private housing market have eased following the latest round of cooling measures in April while a wave of completed projects have tempered pressures in the rental market.  

“Looking ahead, rental pressures should continue to abate as a large number of units are slated to be completed,” MAS said in the report published Monday. “In the near term, demand is expected to be restrained by high interest rates and moderation in wage growth.”

On Tuesday the government followed up by announcing a plan to add 800 hectares (1,977 acres) to the island state’s land mass over the coming decade through a reclamation project along Singapore’s East Coast which would add space for still more homes in the long term. 

New Supply Doubling 

With more projects entering the market this year, the MAS noted that the average price of private homes in Singapore has grown at a slower pace over the past six months, rising by just 4.4 percent year on year in the third quarter after charting an 11.4 percent spike in the first three months of the year. 

“The government has continued its ramp-up of private housing supply via the Government Land Sales (GLS) Programme to meet demand, and will closely monitor market developments including price pressures, with the objective of promoting a sustainable property market,” the MAS said in the report.

The central bank also noted that the volume of home sales in the third quarter, including transactions by developers and in the secondary market, dropped by 15 percent compared with the same period a year ago.

With the government in April having doubled the stamp duty on most home purchases by foreigners, the MAS pointed out that overseas buyers account for 4 percent of overall transactions so far this year, down from 6 percent last year.

On the supply front, the monetary authority said the stock of unsold homes remains below the 10-year historical average while noting that inventories have been steadily increasing since the start of 2022.

Cooling signs have also emerged in the leased residential market as rent growth continued to slow for the fourth consecutive quarter, rising by 0.8 percent in the July through September period from the preceding three months.

There were 8,400 private homes completed in the third quarter alone and approximately another 40,000 new homes are slated for completion between 2023 and 2025 – already double the 20,000 units completed from 2020 to 2022, it added.

East Coast Reclamation

In a move set to provide more space for housing in the long term, Singapore’s National Development Minister Desmond Lee in a speech on Tuesday unveiled plans for the Long Island project, which would reclaim three new tracts of land from Tanah Merah Besar to Telok Ayer Basin as well as establishing a freshwater reservoir. 

While planning and implementation of the project – which would be twice the size of Marina Bay – might take decades, Lee said it will “create land optionality and opportunity for future generations” in land-scarce Singapore while protecting the city-state from rising sea-levels and enhancing its water resilience.

“They could build homes, create jobs, develop services and amenities that they need, and add around 20 km of new coastal and reservoir parks, extending from the current East Coast Park. This would triple the length of the existing waterfront area along East Coast Park today,” he said.

About 30,000 to 60,000 homes could be built in the Long Island project, along with commercial, recreational and green space, according to Huttons Asia senior director for data analytics Lee Sze Teck, who also pointed to the plan as a boon to existing developments in the East Coast area.

“It is highly likely that the allocation for public housing will be more than private housing on Long Island,” he said. “They (private developments along the East Coast) will benefit from the future developments along Long Island. It may even increase the potential for en-bloc in the future.”