Foreigners' Retreat Slows Home Price Growth

The first quarter of 2024 witnessed a slump in new home sales to a 16-year low, largely attributed to the dwindling demand from foreign buyers. This trend has significantly contributed to the easing growth of home prices during this period, according to reports from property analysts.

Developers recorded sales of 1,164 new housing units in the last quarter—an increase of 6.6% from the previous one, but still down 7.3% year-on-year. According to Tricia Song, CBRE's research head for Singapore and Southeast Asia, potential homeowners have become more judicious with their purchases lately.

This recent dip in sales is at its lowest since Q1 of 2008, which prompted private home prices to rise modestly by just 1.4% QoQ compared with an uptick of 2.8% observed over three months prior.

Song believes that this slowdown may indicate growing resistance among buyers towards high-priced homes, given that these prices have surged by approximately 34.3% since COVID-19 hit global shores in early 2020.

New project launches also saw a decline in interest, with average take-up rates falling to just about half (39%) compared to last year's average take-up rate of 54%. Wong Xian Yang, who heads research at Cushman & Wakefield, made this observation based on recent trends.

In terms of quantity, six private residential projects entered the market, offering roughly an additional thousand-plus (1304) new units, surpassing the 1060 units offered in Q4 '23.

Another factor contributing to subdued buying sentiments is likely due to revised policies concerning Additional Buyer's Stamp Duty applicable to foreign investors, which doubled last year, causing many such prospects to shy away from investing here, according to Song’s analysis again for CBRE.

Foreign buyers accounted for a meager 1.2% of all new sale and resale non-landed transactions in the previous quarter, marking the lowest participation rate by foreigners since 1995, as revealed through an analysis of URA statistics by PropNex Realty.

According to PropNex CEO Ismail Gafoor, the decline in foreign homebuyer demand paved the way for local buyers to take over as primary contributors to home sales, encouraging developers to rethink their pricing strategies. He added that this may have resulted in more conservative bids for government land sales sites and pricing units at more affordable levels, considering local buyers are typically price-sensitive compared with foreign investors.

Moving forward into 2024, property analysts predict further easing off of private home prices from last year's surge of 6.7%. CBRE estimates a rise between 3% and 4%, while PropNex anticipates a maximum hike of around just about half (5%).

Despite anticipating an increased pipeline for newly launched projects this year, C&W's Wong noted that due to low unsold inventory and high development costs, developers are unlikely to significantly lower prices.