In Chinese culture, the Snake symbolizes wisdom, intuition and adaptability. Some believe that the year of the Snake could bring subtle, calculated changes which could influence markets to move more cautiously rather than drastically.
Predicting property prices based on zodiac years, like the Year of the Snake is more a matter of cultural symbolism and speculation rather than an economic analysis. While Singapore's property market has shown remarkable resilience, several factors could lead to a potential drop in property prices.
Some factors that may shape 2025's real estate property market in Singapore:
1. Economic Downturn
- A global or domestic recession could result in job losses, reduced household incomes, and lower purchasing power. Reduced demand for property as buyers adopt a wait-and-see approach, leading to downward price adjustments.
- Singapore's economic outlook for 2025 appears moderately positive, with several indicators suggesting continued growth, albeit at a slightly tempered pace compared to 2024.
- The Ministry of Trade and Industry (MTI) forecasts a GDP growth range of 1% to 3% for 2025 and the Monetary Authority of Singapore (MAS) expects GDP growth to be at the upper end of the 2% to 3% range for both 2024 and 2025.
- While the projected GDP growth for 2025 indicates a slight deceleration compared to 2024, the overall economic outlook remains positive, with expectations of continued expansion across various sectors. Prudent fiscal and monetary policies, coupled with Singapore's resilient economic fundamentals are poised to support this sustained growth trajectory into 2025.
2. Interest Rates and Inflation Rates
- The Federal Reserve is expected to lower interest rates further in 2025 which will then reduce the cost of borrowing, making home loans more affordable for buyers. Buyers may likely decide to take this opportunity to purchase or upgrade their property homes, increasing demand and prompting sellers to raise prices in the resale market.
- Inflation rates are anticipated to moderate gradually, with core inflation expected to remain elevated. The MAS is likely to maintain its current monetary policy stance through 2025, focusing on supporting GDP growth while managing inflationary pressures.
3. Supply and Demand in the Real Estate Market
- A large number of new property launches or an increase in completed developments can lead to supply exceeding demand. Developers may offer discounts to clear unsold inventory, leading to a general price decline.
- As of late 2024, Singapore's property market is experiencing a notable increase in housing supply, which has implications for both property prices and rental rates. However, despite the surge in supply, private home prices have continued to rise, with a 2.8% increase observed in Q4 2023. This suggests that demand remains robust, potentially offsetting the effects of increased supply.
- While there is a significant increase in housing supply in Singapore's property market, it has not yet led to an oversupply situation across the board. The continued rise in property prices indicates sustained demand. However, the decline in rental rates and the concentration of new developments in specific areas warrant close monitoring to prevent potential oversupply issues in the future.
4. Weakening Sentiment in the Market
- Negative perceptions about the property market, often fueled by media or analyst reports, can deter buyers. Widespread caution may result in lower transaction volumes and price dips.
- The potential impact of Donald Trump on Asia's economies after 2025 depends on his policy priorities and strategies. Historically, Trump’s administration focused on trade imbalances, renegotiating trade agreements, and prioritizing U.S. interests, which significantly influenced Asia’s economies. Trump might revisit tariffs or trade restrictions on key Asian exporters, particularly China. Southeast Asian economies could see increased trade opportunities if companies continue diversifying supply chains to reduce reliance on China.
- Globally, we may see more countries engaging in protectionist policies that could hinder exports from emerging Asian economies, reducing growth prospects. Currency fluctuations driven by U.S. monetary policy or geopolitical tensions could increase volatility in Asian markets.
5. Foreign Investment in Singapore
- Geopolitical instability, stricter regulations, or unfavorable currency exchange rates could deter foreign buyers. Properties targeting expatriates or foreign investors may see price drops due to decreased demand.
- With Trump regaining power next year, an emphasis on "America First" could lead to reduced U.S. involvement in multilateral trade initiatives, encouraging Asia to deepen intra-regional cooperation.
- Increased rivalry among countries could exacerbate economic tensions, potentially impacting the global supply chain and regional economic stability.
- Policies aimed at decoupling from China may drive further investments in alternative markets like Vietnam, Indonesia, and India.
6. Rental Yields
- Rental yield is the annual rental income expressed as a percentage of the property’s purchase price. There are two types:
- Gross Yield: (Annual Rent ÷ Property Price) × 100
- Net Yield: (Annual Rent - Expenses) ÷ Property Price × 100
- High rental yields signal better returns on investment, making properties more attractive to investors. Increased demand from investors often drives property prices up, particularly in areas with consistently high yields.
- If rental demand weakens, especially during economic slowdowns or if expatriate numbers fall, property investors may struggle to cover their mortgage payments. Investors may sell off properties at lower prices, increasing supply and pressuring overall market prices. Reduced investor interest can slow price appreciation or even lead to price stagnation or decline.
7. Demographic Shifts
- Demographic changes significantly impact property markets by influencing demand, supply, pricing, and the type of properties people seek. Here's how different demographic trends shape the property landscape:
- An aging population with fewer new household formations can reduce demand for housing. This may slow market activity, particularly in certain areas, leading to price corrections.
- A growing population from immigration can boost demand for housing, driving up prices and stimulating new developments.
- Rising numbers of single-person households may drive demand for smaller, compact living spaces, such as one-bedroom apartments or studios.
- As household / individual income rises, home buyers may prefer larger space creating demand for larger properties that allows them to create flexible layouts.
8. External Shocks
- Events like pandemics, natural disasters, or financial crises can lead to market uncertainty and causing buyers to delay purchases, leading to price stagnation or decline in the short term.
- Based on current global trends and potential risks, the following areas could pose challenges or shocks to global markets in 2025:
- Rising Conflicts: Escalations in regions like Ukraine, Taiwan, or the Middle East could disrupt supply chains and global trade.
- Sanctions or Trade Wars: New trade restrictions, particularly between major powers like the US and China, may lead to market volatility. Rising nationalism and protectionist policies could stifle global trade growth.
- Debt Crises: Emerging markets with high external debts could face crises if global liquidity tightens or the US dollar strengthens.
- Oil Price Shocks: Geopolitical instability in oil-producing regions or unexpected cuts in production could drive up energy costs.
- Rare Earth and Semiconductor Dependencies: Supply disruptions in critical materials could create bottlenecks, especially in tech-driven industries.
- Global Warming & Natural Disasters: Increased frequency and intensity of extreme weather events could impact agriculture, insurance, and supply chains.
- New Outbreaks: Another significant health crisis or pandemic could strain global health systems and disrupt economic activity.
9. Government Cooling Measures
- Policies like stricter loan-to-value (LTV) limits, higher Additional Buyer’s Stamp Duty (ABSD), or tightened eligibility criteria for loans can reduce speculative and investment-driven purchases. Reduced demand from investors and foreign buyers may depress prices, particularly in the luxury segment.
- Over the years, the Singapore government has implemented a series of property cooling measures aimed at ensuring a sustainable real estate market and preventing speculative activities.
"Recently there are speculations that the government may possibly announce a property cooling measure soon after last month's record number of new launch condo units sold in November where developers sold 2,557 private homes, which is more than three times the sales volume from previous year's November sales of 784 units" said Kiwi Lim - Associate Group Director of Propnex Realty.
Kiwi Lim believe the government may be closely watching the upcoming condo launch in Toa Payoh -The Orie - a harmonised mega condo project in the highly sought after Toa Payoh district expected to attract huge interest among home buyers with analysts expecting the estimated average price to be hovering around $2,700 psf. If we see more than 80% sold for The Orie in January next year and subsequent new launches in Clementi and Tampines in the 1st quarter of 2025, the government likely may announce another property cooling measure - which could affect first time buyers who are looking to purchase a property."
The first new condo launch in Toa Payoh in 8 years. Register your interest today to receive ebrochure & floorplans!
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