Property Market Summary 2023 and what you can do in 2024
Happy New Year to everyone and I hope the year’s been good for you in 2023. As we move into the year 2024, I want to take this chance to have a quick review of how the property market have moved since covid in 2020 and what we can expect in the year 2024 for potential HDB upgraders.
Let’s begin.
Private Property Growth
Property Price Growth from 2020 to 2023 Source: URA, HDB, Navis Research
Over the past 3 years since 2020, almost all the segments across the board have seen tremendous growth of over 30%, except for the Core Central Region ( CCR ), which consist of mainly luxury properties.
The Outside Central Region ( OCR ) private properties have seen the sharpest increase, and not only that, it had grown the most in 2023, whereas other regions have already started to slow down.
OCR Price Growth From 2020 to 2023 Source: URA, HDB, Navis Research
This is likely to be spurred by the amount of HDB upgraders who took the opportunity to upgrade with their increased profits from year 2020 to 2022. Many families are also taking the chance to upgrade as they understand that they will soon be priced out of the market if they do not take action quick.
Looking at the quarterly growth, OCR does not seem to be slowing down by much towards the end of the year with growth still registering over 4% in the last quarter. Is this trend likely to continue into 2024?
With interest rates dropping, current homeowners can choose to refinance and stay put if they cannot fetch a good price for their property. It is also unlikely for them to lower their selling price as the replacement cost of their property will likely be higher as well.
HDB Upgraders are still in the market looking for the chance to upgrade with their proceeds from the increased profits from their HDB sales.
So I would say the price grow might slow down, but we will not see a drop in prices anytime soon.
HDB Growth
HDB Price Growth from 2020 to 2023 Source: URA, HDB, Navis Research
In the HDB Market, growth is finally correcting back to what we were used to before the pandemic of about 2-3% per year. Of course this depends on the location of the HDB flats itself.
With the announcement of the Plus and Prime category of HDB flats replacing the mature and non-mature estate categorisation, current HDB estates that share similar location with these future Plus and Prime estates has became more sought after than ever.
Source: HDB
They also have the added advantage of having only a 5 year MOP period and no restriction during resale. Owners of these HDBs will see continued growth and demand for their flats.
That said, if you are aspiring to own a private property in the future, it is always better to take action as earlier as it is financially prudent for you to do so. No matter how well these HDB flats will perform, they will still pale in comparison with private properties in terms of growth and demand.
Furthermore, the growth that we have seen in the past 2-3 years are spurred on first by the significant increase in the amount of grants given to resale HDB home buyers to encourage the purchase of resale HDB. This is in line with the government plan to encourage home ownership and family planning without having to wait years for a BTO.
It is further exacerbated by the global pandemic, which brought the entire construction sector to a crawl due to the many restrictions on how work can be performed on site, the shortage of labour and the drastic rise in construction costs.
Now that we have returned to pre-pandemic times, things will begin to normalise again.
BTOs have returned with increase numbers along with shorter wait times and Prime and Plus location estates. Resale demand have begun to drop due to that. The continual drop in growth in 2023 have also signal the return of interest towards BTO.
Source: HDB
What should you do in 2024?
First, identify what are your property goals.
Do you aspire to move into a private property or potentially own multiple properties as a way of building your wealth?
If that is your plan, you should consider getting into the private property sector as soon as you can financially manage.
Property prices in land scarce Singapore is only going to go up in the long term. The rarer the property type, the more and faster it will go up. Even if prices move up in the same percentage points, the difference is still huge.
A 3% growth on a $600,000 4RM HDB means $18,000 but a 3% growth on a $1.5m 3 Bedroom Condo means $45,000.
The price growth in HDB is not going to narrow the affordability gap now, and quite certainly not going to narrow it in the future.
Also, when your age goes up, your loan tenure decreases, and so does your loan quantum. This will mean that you might need to fork out an even bigger deposit if you delay the process of getting a private property. It will also mean that you will need to pay a higher monthly mortgage.
Its a whole process to understand your financial affordability depending on your current property and what is suitable for your family next. If you are unclear on how you can accurately calculate your affordability, contact me for a Free consultation with no obligations.
Once you decide on your plan and confirmed your affordability, you can decide on whether you would want to buy a resale unit to move in immediately from your HDB or to buy a New Launch Unit and rent or stay with your relatives in the meantime ( For those who have the luxury of this option )
2024 is still a Year for New Launches?
2024 is still going to be a year with multiple new launches, including the Chuan Park Enbloc site and the long awaited development in Toa Payoh along Lor 1 Toa Payoh.
But with prices hitting all-time highs, is it wise to buy a new launch still?
Property prices are just going to go up in the long term, that doesn’t change with new launch properties. But some specific causes that will hold the price up will be as follows
Rise in costs
Land cost, construction cost, taxes, cost of labour, inflation, just about every cost has went up. Property developers margins are razor-thin now. In order for them to still make a decent profit selling property, they would have to make sure their margins are still healthy despite the rising costs.
Source: Business Times
2. Shortage of completed Properties in the next few years
Number of expected Private Completed Properties in the Pipeline Source: URA, Navis Research
2023 has seen a flood of new completed units due to the delay in construction. Many mega developments like Treasure At Tampines, Normanton Park, Florence Residences, Parc Clematis, projects with more than 1000 units, were completed. This caused the spike in the amount of completed units in 2023. The figures drop significantly back down to just 9,875 units expected in 2024 and even lower in 2025 and 2026.
This lack of supply will give developers the edge as aspiring buyers will only have very little brand new resale units to buy if they do not want to wait for construction.
This coincidentally also gives property investors a good opportunity to purchase a unit now and let it go when the supply is low.
3. Lower Borrowing Cost in 2024
Source: The Straits Times
The Feds have signalled an interest rate cut in 2024 and gradually further cuts to come in the next few years. Banks have projected this and have already begun to lower home loan rates. You can easily find fixed packages in the range of 3%-3.5% now.
With this relief, home buyers can also be more confident in their affordability on the purchase.
4. Rental Rates Stabilising
Private and HDB Rental Price Trend from 2020 to 2023
And, If you are not one of the fortunate ones to be able to move in with a relative, you will find comfort to know that rental rates are stabilising throughout the market and likely to come down a little from recent highs in both the Private and HDB markets.
In Summary
All these points show that new launch prices are going to be resilient, developer’s have no reason nor incentives to drop prices, and the high prices are just going to become the new norm.
There was a time where $1,200 psf was expensive for a new launch property and some people were saying that it is not sustainable and it will fall back down eventually. They are most likely still sitting on the side lines hoping for a property correction that would never come.
The key here is acceptance. The sooner you accept that this is going to be the price going forward, the faster you can take action.
If you want to have a full plan from selling your current property to upgrading to a new launch property and renting in the meantime and have no idea how to begin, reach out to me and let me run it through with you.
