Singapore’s New Home Sales Hit 15-Year Low

External demand has been hit after the government doubled housing purchase taxes for foreigners to 60% last April

Singapore new private home sales fell in 2023 to the lowest in 15 years, as housing curbs and weakening economic conditions began to weigh on the market. Just 6,671 units were sold by developers last year, figures released by the Urban Redevelopment Authority showed. December sales dropped to 135, less than a fifth of what was sold a month earlier.

The annual figure is the lowest since 2008, and is another sign of a cooling market that has so far avoided the worst of a global housing downturn, but is increasingly being dragged down by real estate purchasing curbs and a slowing economy.

The external demand has been hit after the government doubled housing purchase taxes for foreigners to 60% last April. Citigroup Inc. expects developers’ margins from residential projects to decline further this year, partly due to a sizeable pipeline of about 44 projects.

The appetite for new homes will be tested further in January, with at least six launches slated for this month, according to real estate agency Huttons Group. The slowdown in sales is dragging developers’ shares. City Developments Ltd., Singapore’s largest listed property firm, saw a 19% drop last year, outpacing a fall in the country’s benchmark equity index.

“The high prices of new launches together with a high interest rate environment might be the main reason for lower new sales,” said Ken Foong, an analyst with Bloomberg Intelligence. “Developers might need to moderate the selling prices to attract demand.” The URA said earlier this month that overall transaction volumes in the private residential market – which also includes resale deals – hit the lowest level last year since 2016.

The transaction slowdown has yet to significantly weigh on prices, with local demand bolstering the value of private residential complexes in districts that typically lack such offerings. Home prices rose 6.7% last year, according to preliminary official estimates.

That means there is still “a chance that the government might impose new curbs to ensure a ‘stable and sustainable’ market if prices run ahead of economic fundamentals,” said Foong. Morgan Stanley is predicting a 3% drop, while Citigroup expects a 4-5% gain this year. Bloomberg Intelligence sees prices moving sideways with some downside risk.