SINGAPORE — Housing prices in Singapore are not expected to rise indefinitely as signs of moderation are being observed in the public and private housing markets, said National Development Minister Desmond Lee.
Mortgage rates are expected to remain high, which will have an impact on buyers and home owners, Mr Lee added in an interview with The Straits Times and Chinese daily Lianhe Zaobao on Dec 28.
"We expect (interest rates) to remain high for longer, and the rates we see are between 3.7 per cent and 4.4 per cent, so that will have an impact," he said.
Amid muted prospects for Singapore's economy in 2024, many Singaporeans have been exercising "a lot of prudence and care in this uncertain environment", Mr Lee said. He noted that major economies are expected to see slower growth in the midst of geopolitical tensions arising from the conflicts in the Middle East and Europe, for example.
Housing demand shot up during the Covid-19 pandemic, with the number of first-time Housing Board Build-To-Order (BTO) flat applicants rising by 80 per cent from 2020 to 2022, compared with 2017 to 2019.
The pandemic's impact on construction, materials and labour led to longer waits for BTO flats, which drove some home seekers to the resale market, causing prices to rise, Mr Lee said.
The delays and uncertainties that came with BTO flats also led to some applying for a flat earlier than intended, while the demographic shift towards smaller households propped up demand.
The Government has been working to address this supply-demand imbalance, including in the private housing market, over the last few years, Mr Lee said.
The authorities had pledged to launch 100,000 BTO flats from 2021 to 2025. About 63,000 flats had been rolled out by 2023 and 19,600 are in the 2024 pipeline.
Application rates have stabilised, with 1.9 first-time applicants for each flat in 2023, down from 3.7 in 2019, said Mr Lee.
The land supply for private housing was also ramped up in 2023, with 9,250 units released as part of 15 confirmed sites under the Government Land Sales programme. This is the highest in a decade, Mr Lee noted.
Another 5,450 units across 10 sites are set to be released in the first half of 2024. It will be the seventh straight half-yearly increase in supply since the first half of 2021.
The rental market, which recorded strong pandemic demand as people rented while waiting for their delayed homes, has also started to show signs of easing. This, Mr Lee said, can be attributed to the return to post-pandemic normalcy as well as the number of completed units.
In 2023, nearly 42,000 public and private homes were completed, comprising about 21,400 HDB flats and 20,400 private units. This was the biggest annual supply of completed homes in both markets since 2017, he added.
Although property prices continued climbing, signs of moderation were seen in both markets. HDB resale prices rose 4.8 per cent in 2023, slower than the 10.4 per cent increase in 2022, while private home prices grew 6.7 per cent in 2023, compared with 8.6 per cent in 2022, according to government flash estimates.
Mr Lee was asked if the authorities would increase subsidies for prime location flats if resale prices continued to rise. Flats under the prime location public housing (PLH) model have extra subsidies on top of existing BTO subsidies.
In the BTO launch in December 2023, the extra subsidies for two PLH projects were raised in response to rising prices in the resale market. The subsidy clawback for these flats was set at eight per cent, up from six per cent for past PLH projects.
In response, Mr Lee said a range of measures are in place to manage supply and demand to stabilise the property market.
"We do not want a bubble to appear. A rising resale market is healthy only if the economic fundamentals and the rate of growth are in tandem, so it remains affordable," he said.
Cooling measures such as higher additional buyer's stamp duty (ABSD) rates and lower loan-to-value limits for HDB loans were rolled out from 2021 to 2023, he noted.
"Today, when you see the property market rising, the vast majority is driven by locals who are buying for home ownership," he said.
Mr Lee said that if the resale market remains buoyant, the Government will have to consider, among other things, "increasing the discounts given to people in order for them to be able to afford" BTO flats in attractive locations.
From October 2024, BTO flats will come under a new Prime, Plus and Standard model.
Flats in choicer locations under the Prime and Plus tiers will come with higher subsidies over Standard flats and have stricter resale conditions, such as a 10-year minimum occupation period and a subsidy clawback.
Mr Lee said that if home seekers are looking for a centrally located flat, it "must be fair" that it comes with tighter restrictions to deter those who may not be in it "principally for home ownership".
There is more than enough demand from genuine buyers for public and private housing, he said. And while investment properties are needed to maintain the rental market in Singapore, measures such as ABSD "clearly underscore the fact that residential housing is principally for home ownership", added Mr Lee.
He was also asked if the rule introduced in September 2022, where private property owners must wait 15 months before they can buy an HDB resale flat, will be reviewed or lifted.
He stressed it is a temporary measure.
It was targeted at private home owners who were buying bigger and costlier resale flats, adding to the buoyancy of the resale market, Mr Lee said.
"We'll continue to (watch) the market closely... Now is not the time to lift it, but we continue to look for the right timing to lift it."
On plans for more homes in central locations under the 2025 Draft Masterplan, Mr Lee said the Government wants to approach redevelopment with even greater sensitivity, and will take into account heritage and biodiversity.
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He noted how Bukit Timah Turf City, which has been earmarked for residential development since 1998, has heritage value, being the country's second racecourse, as well as biodiversity, with streams and lush greenery. The Government is studying the possibility of building public and private homes there.
Detailed heritage and environmental studies are continuing, and draft plans for Turf City will be announced in the middle of 2024, he said.
When pressed on plans for the Long Island project, which could create 800ha of reclaimed land off East Coast Park for homes and other amenities, Mr Lee said there are "no hard timelines" as technical and environmental studies and public consultations are just starting.
"The technical studies will tell us what is possible, what is not, and will be able to guide us in terms of timeline," he said, adding that a clearer schedule will emerge in several years. "It is quite clear this will take decades."
Long Island is meant to reduce flood risks in the East Coast area while meeting the country's future land needs.
Asked how the authorities are getting support from Singaporeans for the major undertaking despite it being far in the future, Mr Lee said the Government's mindset is to "consume the resources we need to benefit our generation but always keep thinking about future generations, knowing that this will not benefit us directly".
"So some of these decisions have to be made knowing that some, or many of us, may not be around to realise its protection or its benefits," he said.
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This article was first published in The Straits Times. Permission required for reproduction.