But the company was certain – and positive – that buyers and investors would continue to invest in the Singaporean property market, given the city’s status as a safe haven and hub for business opportunities.

In other words, the market will remain buoyant and current forecasts show that, collectively, developers will build more new homes this year than in previous years.

But there will be many developers who will watch from the sidelines as rising interest rates, recession fears and tightening wallets may mean fewer sales.

The catch-up will take time, so rents and home prices may stay elevated for a few more years before they start to cool, property analysts say.

State of supply

Singapore’s supply of housing includes both homes for owner occupation and those available for rent by investors and there are both public and private homes.

The Singapore government is on track to ramp up the supply of public housing, which is available for sale only to Singaporeans and permanent residents.

The Housing Development Board said it was building 100,000 flats between 2021 and 2025. On an annual average, that would surpass the 14,600 units built in 2019.

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Many expats who rent do so in the private housing market, which includes condominiums and houses.

Over the last quarter of 2022, private housing vacancies fell to 5.5 per cent, from 5.7 per cent in the previous quarter, according to Singapore’s Urban Redevelopment Authority (URA).

Despite a much higher increase in the supply of homes, occupation also leapt, forcing down vacancy.

In general, the supply of private housing available for occupation had dropped since 2018, when the Singapore government introduced price-cooling measures, real-estate agency Huttons senior director of research Lee Sze Teck said.

The heated market in which demand exceeded supply could be seen in the number of unsold units, which had plunged to a low of 16,152 units by the end of last year, Lee said.

The 10-year average number of unsold stock between 2012 and 2021 was almost 28,000 units.

“The property market is in a state of undersupply and it will take years before it returns to equilibrium,” he said.

But there is good news, according to the URA. It forecasts that there will be nearly 20,000 potential completions this year, from previous project launches, with another roughly 12,000 units to be completed next year. In comparison, nearly 9,000 were finished last year.

Still, that would not fill the supply gap for both buyers and tenants, Lee said.

“After 2023, completion of homes will drop again. The rental market is expected to remain tight and rents will continue to grow,” Lee said.

What about new launches?

Leaving aside public housing, private housing developers are preparing to launch more new units this year than they have in the past three years, according to agency Propnex Realty.

They will launch 12,000 units, compared to about 4,500 units last year and just over 10,000 units the year before.

“The estimated 12,000 units … would be the highest in recent years if they do hit the market,” chief executive Ismail Gafoor said.

But, he cautioned, it would all depend on various factors, including available land for purchase from the government and the speed of regulatory approval for the projects to go ahead.

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While 12,000 more new units might look promising, it is a low from private developers since government agencies started releasing such figures in 1996.

Indeed, there is a sentiment of uncertainty in the residential development sector, according to the latest Real Estate Sentiment Index survey conducted by the Institute of Real Estate and Urban Studies at the National University of Singapore. Only about half of developers surveyed said they would increase the number of new launches in the next six months.

“The results indicate that they were mixed about the supply strategy amid the uncertainty associated with the macroeconomic and rising interest-rate risks,” said Sing Tien Foo, a professor at NUS Business School’s department of real estate.

Leonard Tay, head of research at Knight Frank Singapore, said a “climate of caution” hit developers when the pandemic started in 2020.

With Singapore’s economy contracting by some 5.4 per cent that year, developers have become risk averse towards new projects.

While the economy has gradually recovered, developers are still grappling with high costs and a shortage of labour, thanks to the upheavals in supply chains caused by the pandemic.

“It has been and continues to be challenging times for developers,” Tay said. “Developers are more careful and selective in purchasing development land and undertaking projects.”

New cooling measures in 2021 in the form of higher stamp duties for developers were also deterrents, Propnex’s senior associate division director Clarence Foo said.

The government had reined in the property market before it was hit with a post-pandemic buying spree, which was what happened in countries such as Australia after restrictions were lifted.

These add further pressure to existing ones for developers, such as having to complete and sell units within five years from the time land is purchased. Recently, some developers offered six-figure discounts on several glitzy private residential properties in downtown Singapore as their deadlines neared.

Developers were also concerned that potential homebuyers would end up “camping on the sidelines” until economic uncertainties played out, added Tay from KnightFrank.

“The greater volume and variety of new private stock comes at a time of economic uncertainty, employee lay-offs in the technology sector, continued rising interest rates as well as the increased cost of consumption,” he said.

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Developers will soldier on

Nevertheless, interest rates are still very low at between 1 and 3 per cent, even if they are rising, according to Desmond Sim, chief executive at property consultancy Edmund Tie.

Buyers would eventually adjust to a new normal of higher rates and buy what they could afford, he said.

For many buyers, rising interest rates were not prohibitive as repayments were progressive, Huttons’ Lee said.

“So developers will continue to launch their projects for sale, regardless of the economy or interest-rate movements,” he said.

In short, property developers would work through new risks and soldier on with development, Sim said. Supply of housing would keep flowing, even if muted, he added.

“This is the lifeblood of developers. If they don’t do enough projects, it’s going to affect their bottom line,” Propnex’s Foo said.