Landed markets saw a notable dip in transaction volumes going into Q3. This was not entirely unexpected, following new property cooling measures in September 2022.
However, buyers seeking discounts may still be disappointed, as landed home prices continued to rise, albeit at a slower pace. Although it’s too early to be certain, this may be a sign that the market is reaching an inflection point.
Here are some key takeaways from Q3 numbers:
An overview of the wider landed market
Transaction Volume & Value
As of Q3 2022, average landed property prices island-wide stand at $1,743 psf. This is up 3.9 per cent from the previous quarter, and is around a 12.7 per cent increase from Q3 last year. Note that this is the eighth consecutive quarter of rising prices, since Q4 of 2020.
While home prices continued to rise, there has been a notable dip in transaction volumes. There were 410 landed home transactions in Q3, down 16 per cent from the last quarter. Transactions volumes were only half of what we saw this same time last year.
Dual factors: Singapore cooling measures and Fed rate hikes are giving buyers pause for thought
In September 2022, the government introduced new cooling measures. One of these measures was to raise the interest rate floor to four per cent, for the purposes of calculating the Total Debt Servicing Ratio (TDSR).
The TDSR limits home loan repayments – inclusive of other non-property loans – to 55 per cent of the buyers’ income. The interest rate floor is set at higher than the actual market rate for home loans, to ensure borrowers can cope with rising rates.
A $2 million dollar home loan for 25 years, for instance, would count as having a monthly loan repayment of around $10,557 (four per cent interest), for TDSR calculation. This is even if the actual loan rate is only three per cent ($9,484 per month).
The decision for the loan curb follows rapidly rising home loan rates. In January of this year, the 3-month SORA rate was just 0.194. B y 31st October this year, the rate had risen to 2.46.
The rising interest rate follows the American Federal Reserve’s rate hikes, as the US struggles to cool rampant inflation rates. This has a knock-on effect in the Singapore market, with many local banks raising rates in tandem.
These dual factors of loan curbs, coupled with mounting interest rates, may have sent a larger number of buyers into a “wait and see” mode.
Market sentiment also plays a role here, as Singapore buyers tend to have a knee-jerk response to cooling measures. Buyers want to avoid “buying at the peak”, where prices may plummet shortly after the cooling measures sink in.
Going by historical precedent, the Singapore property market often adapts to new cooling measures in the span of two to three quarters, after which we tend to see a gradual uptick in transaction volumes again.
A price correction may be too much to hope for in the meantime. Most Singapore sellers are well capitalised and are in no hurry, so have little reason to reduce their asking prices.
Terrace houses saw the least decline in transaction volumes for Q3
Transaction Volume & Value
Terrace houses saw the smallest drop in buyers, with just a five per cent reduction from the previous quarter. Detached houses saw the biggest drop in transaction volume, falling by close to a third, whilst Semi-D units saw transaction volumes fall by 26 per cent.
This coincides with the price movements we’re seeing:
Price (Q2 2022)
Price (Q3 2022)
Terrace houses have been spared any significant price jumps from last quarter. While detached and semi-D units moved up by 11.2 and 4.2 per cent respectively, terrace units have only seen a small price movement of under three per cent.
This would make terrace units more palatable, especially considering loan curbs and rising interest rates.
Another factor here is simply supply. 2021 was an outstanding year for landed properties, and we saw triple digit transaction volumes for detached homes across three quarters of 2021 (112 in Q1 2021, 119 in Q2 2021, and 133 in Q3 2021). The lower transactions volumes this year may be reflecting the general scarcity of detached units, as housing supplies continue to remain low.
99-year leasehold landed homes are starting to narrow the gap with freehold counterparts
Q3 2022 defied the common belief that freehold landed is the only desired type of landed property. By prices and volume, leasehold properties fared better:
Types of Landed - 99-Year Leasehold
Types of Landed - Freehold/999
As with the wider market, both leasehold and freehold landed continue to see rising prices, but with a dip in transaction volume. The price increases for freehold are significantly higher at 11.3 per cent however; and the market may be reaching its highest tolerance.
Following the September cooling measures, it’s likely that some buyers are now reconsidering the premiums on freehold properties (often around 15 to 20 per cent higher than lease counterparts); and may now see leasehold as a viable alternative.
Viable districts to start your property search: which areas have seen the lowest price increases?
For deal hunters, districts 11, 13, and 23 are the areas to keep an eye on.
Looking at prices by district, we can see only two areas where landed homes were cheaper at end of Q3 2022. These are District 11 (Parts of Bukit Timah, Dunearn Road, and Newton) and District 23 (Bukit Batok, Choa Chu Kang, Upper Bukit Timah).
In the east, district 13 (Potong Pasir, MacPherson) saw prices stay flat.
In general, we can see it’s increasingly difficult to spot landed properties at below $1,800 psf. Only the east side has two districts (14 and 16, the Geylang and Bedok areas) which still fall below this price. We can see that these same districts are also the ones showing marked price increases of seven to nine per cent since Q2, so the market seems to have picked up on this – buyers may want to move before prices rise further.
Besides these, Districts 16 (Bedok and Upper East Coast) and 28 (Yio Chu Kang and Seletar) are notable for still having prices below $1,800 psf. However, both districts have seen a pick-up in price over the last quarter, and they may not remain that low for long.
My key takeaways for Q3 2022
The most visible trend is that transaction volumes are falling, even as prices continue to rise. These patterns often – but not always – suggest an inflection point: buyers may be signalling that their tolerance for further price hikes is coming to an end.
This likelihood is increased by wider economic trends, such as the growing concern over rate hikes, inflation, and market volatility introduced by the war in Europe.
However, having served both camps (buyers and sellers), the sellers still have an edge. The supply of private housing is low, especially for already-scarce landed properties.
Even with rising interest rates, I have noticed that buyers are still willing to tolerate small premiums, so there’s room to negotiate.
In a recent transaction in the Siglap area, for instance, I helped a client looking for a semi-D unit for their family; they were willing to accept a small premium, in exchange for the relatively new renovations and strong location (it was near school and work places for them).
It’s also worth noting that several sellers are themselves buyers – they may be looking to move on to their next property, and are compelled to sell higher to ensure their next home is within reach.
For a more detailed neighbourhood transaction report (e.g. East region quarterly report), please feel free to email us at email@example.com or WhatsApp us at (65) 9068 9692.