Overview Prices of private homes in the third quarter declined 1.1 per cent, a reversal from the 0.9 per cent growth in the second quarter of this year, according to the flash estimates released by the Urban Redevelopment Authority (URA). This is the biggest drop since Q3 2016, when prices fell 1.5 per cent.
In the first three quarters of 2024, there was a 1.1 per cent increase in prices, which was significantly slower than the 3.9 per cent upturn observed during the corresponding period in 2023 and 8.2 per cent growth in the first three quarters of 2022.
Prices in sub-markets
The price decrease was led by a price fall in the landed segment, which declined by 3.8 per cent, followed by non-landed properties – or condos and apartments – which fell marginally by 0.3 per cent in the third quarter.
Among the sub-markets, prices of condos and apartments dipped the most by 1.5 per cent in the luxury or the Core Central Region (CCR). This is followed by a marginal drop of 0.1 per cent in the suburbs or Outside Central Region (OCR). Prices rose marginally by 0.2 per cent in the city fringe or the Rest of Central Region (RCR).
Reasons behind the price drop
The price decrease could be caused by decreased demand for housing in the third quarter of this year. According to flash estimates by URA, sales transactions fell by about 11 per cent on a quarter-on-quarter basis in Q3 2024.
Furthermore, many consumers may have exhibited greater caution in their purchasing decisions, as they were more restrained in their affordability due to the elevated cost of living and interest rates. Others could have refrained from making purchases as they were anticipating a potential decrease in interest rates to be declared by the Federal Reserve in September.
Overall prices may have also declined as the proportion of private homes commanding higher prices has dropped. According to URA Realis data downloaded on 01 October 2024, the proportion of private homes (landed and non-landed excluding executive condominiums or EC) in the luxury segment or Core Central Region dipped from 16. 3 per cent in Q2 2024 to 13.1 per cent in Q3 2024. Comparatively, suburban private homes which were sold at relatively lower prices rose from 53.6 per cent to 56.4 per cent over the same period.
Further, there were fewer private homes sold at higher price tags. For instance, the number of non-landed and landed homes excluding EC sold for at least S$3 million decreased slightly from 887 units in Q2 2024 to 768 units in Q3 2024. Private homes transacted for at least S$5 million had similarly dropped from 273 units to 211 units over the same period.
Outlook
After the Federal Reserve announced the interest rate cut in September, we do not expect an immediate surge in home buying. This is due to the likelihood that most financial institutions have already factored the interest rate adjustments into their mortgage plans.
However, should the Federal Reserve continue to lower interest rates in the coming months, buying sentiment is expected to improve as housing becomes more affordable. Moreover, the decrease in interest rates may prompt individuals to consider purchasing larger homes or properties in upscale locations, since their mortgage payments have been reduced.
Furthermore, it is projected that both the global and Singaporean economies will exhibit positive growth in the current and upcoming years, which is expected to contribute to more favourable employment conditions which in turn will benefit the property market.