Analyst sees sluggish year ahead for real estate market

CDL remains RHB’s top pick this year.

Singapore’s private residential market is facing a “slow grinding year” this 2024 amid easing home price growth and falling rents, according to RHB. 

In a note on Monday, RHB property and REIT analyst Vijay Natarajan projected private home prices to stay muted in the first half of the year as interest rates are likely to remain elevated and the cautious buying sentiment persists.

Natarajan sees home prices rising by around 1% to 4% in 2024, a tad higher than his previous 0% to 2% forecast, but still dramatically slower than last year’s 6.7% estimated price growth and the 8.6% spike in 2022.

He said private home sales, excluding executive condos, will likely “remain sluggish amid signs of buyer fatigue” this year. The higher volume of new launches should drive new home sales to slightly increase to 7,000 to 7,500 units this year compared to last year, although trading in the resale segment will stay flat, he said.

“For 2024, we expect inventory to build up steadily, on the back of a strong new launch supply pipeline and more selective buying demand,” he said. “The increased supply and relatively high interest rate environment will be a key factor in keeping the price growth in check in the coming years, in our view.” 

READ MORE: Private home market to achieve price-supply ‘balance’ in 2024: analyst

In the rental sector, Natarajan expects rents to drop across the board by around 5% to 10% this year as the string of project completions push vacancy rates to climb, with the high-end segment set to record the sharpest rental drop.

“This, coupled with sharp hikes in overall market rental rates in the last three years (+56%) reducing affordability, has led to the market being poised for a correction in 2024,” he said.

RHB sees City Developments Ltd outperforming the market considering the property heavyweight already sold a huge portion of its Singapore residential landbank in the past two years, while its remaining stock is well spread across the city-state and market segments.