Home price growth slows as sales dip, foreigners scale back: analysts

Prices have risen by 34.3% in the past four years.

New home sales slumping to a 16-year low, exacerbated by the waning demand from foreign buyers were the primary cause of easing home price growth in the first quarter, according to property analysts.

Developers sold 1,164 new housing units last quarter, up 6.6% from the previous quarter but still down 7.3% year-on-year, as homebuyers have grown more selective and cautious with their purchases recently, said Tricia Song, CBRE’s research head for Singapore and Southeast Asia.

With the latest tally sliding to its lowest since the first quarter of 2008, private home prices eased to a 1.4% QoQ uptick in the first quarter from 2.8% in the previous three months. 

Song said the slowdown could also be a sign of increasing resistance to high prices among homebuyers as home prices have already risen by 34.3% since the start of the COVID-19 pandemic in 2020. 

The buzz from new project launches tapered off as well, with the average take-up of new projects launched in the first quarter declining to 39% from the 54% average take-up rate a year ago, said Wong Xian Yang, research head at Cushman & Wakefield.

Last quarter saw six private residential projects hit the market with 1,304 new units launched, 23% higher than the 1,060 units launched in the fourth quarter.

In addition, CBRE’s Song said buying sentiment among foreigners declined after the Additional Buyer's Stamp Duty they have to pay was doubled last year.

Foreign homebuyers only accounted for 1.2% of all the new sale and resale non-landed transactions last quarter, lower than the 1.7% share in the fourth quarter and the lowest participation rate among foreigners since 1995 based on an analysis of latest URA statistics by PropNex Realty.

This paved the way for local homebuyers to serve as the primary driver of home sales in the city-state, a trend that may have pushed developers to rethink their pricing strategies, according to Ismail Gafoor, CEO of PropNex.

“This could have manifested in their more conservative bids for government land sales sites and pricing units at a more accessible price quantum, since local buyers tend to be more price sensitive compared with foreign investors,” Gafoor said.

READ MORE: Private residential price growth eases to 1.4% in 1Q24

For the entire year, property analysts expect private home prices to ease further from last year’s 6.7% price surge.

CBRE sees home prices rising by 3% to 4% in 2024 while PropNex forecasted an up to 5% price increase. 

“Amidst a higher new launch pipeline this year, new launches are expected to be priced competitively. Developers are unlikely to lower prices significantly as unsold inventory remains low and development costs remain elevated,” said C&W’s Wong.