The current rise of land and property prices in Singapore has seen the real estate industry labelled as “a property market on steroids.”
And this sentiment is born out of the fact that the cost of private homes in the city-state are up 7.3% year-on-year. National and foreign investors have been clamouring for newly developed properties, as the potential for a significant return on investment has long been a motivation for those looking to invest in Singapore real estate.
The rise in Singapore property prices is mirrored in other parts of the Asia-Pacific region, and there is undoubtedly a private housing boom in full flow in 2021.
With this in mind, this article looks at recent URA land sales in Singapore, and presents some of the factors that have contributed to increasing property prices in the city-state, before looking at what this might mean for the future of the real estate market.
The Boom in Asia-Pacific’s Real Estate.
To understand the future direction of the Singapore real estate market, it’s helpful to look at the current boom of real estate in the Asia-Pacific region in general. According to Knight Frank, the annual average growth across the Asia-Pacific region is at 6.4% year-on-year, which is the highest increase since 2017.
The increase in prices of real estate across the region has been driven largely by intense competition amongst home buyers, which has resulted in bidding wars and huge cash offers that have exceeded market valuations. In many instances, some buyers have not even viewed the properties that they’ve purchased, such is their desire to land exclusive units.
Below is a table that outlines the current boom in Asia-Pacific real estate, and where Singapore is currently positioned relative to other major cities in the region:
|City||% Increase (year-on-year)|
|Singapore (outside central region)||13.9|
Source: Knight Frank, 2021.
There’s no getting away from the fact that Singapore property prices are rising, but what is driving the current rise, and is it likely to be sustained in the near future? These are important questions to answer, but first we need to understand how land is sold and appropriated in Singapore, before looking at the factors that have driven its recent price increase.
Understanding URA Land Sales in Singapore.
In Singapore, the Urban Redevelopment Authority (URA) is responsible for managing and appropriating state land for development. Working to a long-term Concept Plan, and seeking to operationalise the shorter-term Master Plan, URA releases state land through the Government Land Sales (GLS) Programme.
This process takes place every six months, and GLS sites are released via the Confirmed List or Reserve List. The Land Sale Procedure is comprehensive and companies planning to develop properties in Singapore must register for an eDeveloper’s Packet. Developers are then able to apply for sites that have been listed for sale by URA and are invited to explore the technical conditions related to the tender.
Once tenders have been received, considered, and approved, development can begin on the land parcels that have been sold. In recent times, newly developed properties in Singapore have increased significantly in price. So, it’s important to question, what are the factors that are driving the current boom in Singapore property prices?
Factors Driving the Increase in Singapore Property Prices.
Singapore is a great place to live and will continue to be long into the future, particularly if the URA Master Plan is anything to go by. And by current estimations, the price of real estate will continue to rise in the future. Here are some figures relating to factors that are driving the increase in Singapore property prices right now, starting with the increasing state land costs.
Increasing land costs.
The average cost of land in Singapore is up in each region in 2021. The price of land in the Core Central Region (CCR) has increased by 5.2%, and land in the Rest of Central Region (RCR) and Outside Central Region (OCR) is up 8.9%. Of course, the more expensive land is for developers to purchase, the higher the price of real estate when it comes to market.
Depletion of unsold uncompleted units.
At the end of August 2021, there were just 16,418 remaining unsold uncompleted units in Singapore, down from 26,483 at the end of Q3 in 2020, which is very close to the last low in Q2 of 2017, which saw the number at 15,085. The less available units, the higher the price those on sale can command.
Rise in construction costs.
In a four-year period, the price of construction has increased significantly, having a knock-on effect on Singapore property prices. Regarding the Construction Tender Price Index, it was at 96.7 in 2017, and rose to 116.1 by the end of Q2 in 2021. This is a 20.1% increase in a four-year period.
There has also been a significant recent rise in condo construction costs, as exemplified in the table below:
|Construction Cost (S$/sqm)||Average standard condo||Above average standard condo||Luxury condo|
Naturally, as construction costs rise in accordance with increasing land costs, so too will Singapore property prices in general.
Increasing launch prices.
Finally, the launch prices of properties across Singapore are increasing, as a result of several of the factors introduced above. The launch price of Singapore real estate is calculated in the following way:
Land cost + construction cost + marketing cost + developer margins = launch price.
Across all districts in Singapore, launch prices are expected to increase by 2022-23, as detailed below:
|Median New Home Prices (Jan-Aug 21) by Area (psf)||Future New Launch Price (2022/23) (psf)||Percentage Increase|
|EC: $1,159||$1,100 – $1,400||+21|
|D2: $2,565||$2,500 – $3,800||+48|
|D5: $1,772||$2,300 – $2,600||+47|
|D8: $1,896||$1,900 – $2,200||+16|
|D20: $1,784||$1,900 – $2,100||+18|
|D21: $1,821||$1,800 – $2,100||+15|
|D26: $1,418||$2,100 – $2,400||+69|
These four primary factors have driven the substantial increase in property prices in Singapore in recent times, and should also be considered in relation to the allure of residing in Singapore, for both nationals and residents alike. Singapore is consistently ranked as one of the best places to live in Asia for several reasons, and was ranked as the top city in Asia in terms of quality of life.
It stands to reason that the more people who look to invest in property and relocate to Singapore, the higher property prices will become.
Where are Singapore Property Prices Heading in the Near Future?
There’s no immediate sign that Singapore property prices are likely to decrease any time soon. But as they’ve done in the past, commentators believe that the government may intervene to calm the sharp rise in Singapore property prices. The government has a number of tools at its disposal to cool the real estate market, and may increase stamp duties on foreign buyers with multiple homes, or increase the proportion of down payments made. The government last tightened regulations in 2018 after prices rose to about 9% in one year.
In spite of likely curbs, few people doubt that investment in Singapore real estate is a savvy long-term investment. The city-state has long attracted foreign investment in the real estate sector, as people are attracted by the nation’s peace, prosperity, and tax advantages. A slight short-term dip in Singapore property prices in the short-term is unlikely to significantly affect investment in real estate.
Should I invest in Singapore Real Estate?
With a stable currency, favourable taxes, and low interest rates, investing in Singapore will continue to be a shrewd investment for national residents and foreigners alike. As Singapore continues its recovery from the global COVID-19 pandemic (Singapore has a vaccination rate of 80%), we are likely to see foreign investors return after a two year hiatus enforced by the virus.
Should you have the necessary means, investing in Singapore real estate is still a wise choice. As you prepare to look for your perfect home, be sure to check out the URA Master Plan to understand future developments in the areas that you’re seeking to invest in. This will help you to find the ideal property and avoid any unfavourable circumstances.
The bottom line is that Singapore property prices are likely to increase in the coming years, so an investment in real estate in the city-state is likely to be a shrewd investment.