It’s a brand new year and 2023 certainly brings about much anticipation and excitement for the property market. If we were to sum up 2022 in a nutshell for the property market, we’d say it was nothing short of groundbreaking.
We’ve seen the highest number of resale HDB flats broaching the million-dollar mark, and a general increase in property prices and rental rates across the board.
How will 2023 be like? Will we see similar trends as 2022? We speak to Kelvin, a real estate agent from ERA Realty who’s been in the industry for close to 8 years now, to find out possible patterns and market predictions for the year ahead.
1. Expect bank loan interest rates to be sustained at high levels, or possibly even higher
2023 is shaping up to be quite an expensive year, especially if you’re currently servicing a home loan from a bank.
As of 3rd Jan 2023, fixed home loan interest rates from local banks such as DBS, OCBC and UOB range from 4.25% to 4.5%, the highest since the early 2000s. Depending on the prevailing 3M SORA (3-month Singapore Overnight Rate Average), floating loan packages too aren’t that far off, resulting in some pretty hefty interest payments that homeowners have to fork out for their monthly mortgages.
How will 2023 turn out to be? Unfortunately, all signs point towards more rate hikes on the horizon, says Kelvin, at least for the first half of 2023. Expect interest rates to possibly go as high as 5.0%.
This is because the US Federal Reserve, which is basically the central bank of the United States, looks set to introduce even more interest rate hikes in 2023 with no reductions until 2024.
As you may know, the US Federal Reserve has been increasing interest rates since early 2022 to the highest levels in 15 years, in order to combat inflation. So far, it seems that inflation is still at elevated levels, which means that interest rates have to be sustained or further tweaked upwards.
If you’re currently on a HDB loan, then congratulations, you can enjoy the current 2.6% interest rate which has been unchanged since 1999. If you’re on a bank loan, then Kelvin would advise homeowners to look at refinancing or repricing options to see what would best suit your needs.
If you’re able to handle some short-term volatility, then having a floating package would be best suited for you, especially if the macroeconomic situation improves from the second half of 2023. However, if you prefer a bit more certainty, then a fixed loan would be better.
2. Higher rental rates
For those who are currently renting or looking to rent, then expect rental rates to increase in 2023 as well, says Kelvin.
This is largely due to the projected increase in home loan rates, as we previously outlined. Typically, landlords who are currently renting out their units and also servicing a loan for that unit would pass on the increase in interest rates to their tenants, by increasing rental rates.
In addition, the general increase in prices across all property types would also result in more people deciding to rent instead of purchasing a property, driving up rental demand and conversely, rental prices. The expectation of a recession looming in the near future would also mean people being more conservative with large purchases, and so instead of committing a large amount of money for a property purchase, they’d rather weather the cheaper alternative of renting a home instead.
How much of an increase can we expect? Well it’s hard to say, but we can look back to some stats from 2021-2022 for some indication. According to online reports, HDB rental rates for flats in mature and non-mature estates saw a year-on-year increase of 27.4% and 28.0% respectively from 2021 – 2022.
For condos, rents in the Core Central Region (CCR), Rest of Central Region (RCR) and Outside of Central Region (OCR) saw an increase of 30.6%, 33.9% and 36.5% ,respectively in the same time period. If anything, expect rental rates to remain sustained at the current high levels, or possibly even increasing in 2023.
3. Slower growth in HDB resale prices
2022 will be known as the year with the highest prices ever for resale HDB flats.
After all, as of December 2022, there were a total of approximately 342 flats transacted for over a million dollars in the resale market, eclipsing the previous record of 259 in 2021. And according to the HDB’s Resale Price Index, prices across all resale flat types increased for 10 straight quarters, since 1Q 2021.
In terms of demand trends, it seems that many homebuyers were keen to prioritise floor area as a determining factor when looking for units to purchase, as evidenced by the many jumbo flat types (e.g. maisonettes) that were sold last year.
Image adapted from: HDB
If you’ve been keeping up with property news in 2022, you’ll know about how this trend has sparked a lot of conversations, and in particular, concerns over the affordability of homes here in Singapore. With the introduction of new cooling measures from 30th Sep 2022, we’ll just have to wait and see how the market reacts in the next few months.
So how will 2023 shape up?
Image credit: Galen Crout
According to Kelvin, you can expect prices to still be on the rise, but at a slower pace than what we’ve seen over the past few quarters. There are few reasons for this: for one, because of the uncertain economic outlook for the next year, people are expected to be more conservative about their property purchasing plans, holding off plans to upgrade or move for the time being.
In addition, now that BTO completion dates are back on track, we can expect a return to healthy demand levels for BTOs. That being said, a large portion of potential homebuyers are still cash-rich, and so we can expect to see even more million-dollar sales for jumbo flats and possibly even large unit types like 5-room flats.
4. Exciting new property launches
Not so much of a trend, but here’s what to expect in terms of new property launches in 2023.
For BTOs, the first BTO exercise is set to take place in February, with about 4,410 units launching across Kallang/Whampoa, Jurong West, Queenstown and Tengah.
Image credit: Singapore Property Website
For condos, here are some of the properties set to launch this year:
- Sceneca Residence
- The Atelier
- Terra Hill
- Lentor Hills Residences
- The Botany @ Dairy Farm
These condo launches have been quite well-received amongst potential homebuyers. According to reports, over 3,000 people showed up on the very first day of Sceneca Residence’s showflat launch, including a good number of overseas visitors.
Sceneca Residence is the first private condo to be launched in 2023, and is a mixed-use development located at Tanah Merah Kechil Link, with a supermarket and various F&B and retail outlets on the first floor.
Property trends for 2023
Overall, it seems that the first half of 2023 is set to be a continuation of what we saw in 2022. With an uncertain outlook on how the economy will pan out next year, the market would more or less be status quo for the time being, as it waits to see how market forces will react to various news and announcements.
However, one thing seems to be certain: expect 2023 to be much more expensive than 2022, with increasing home loan interest rates and also higher property prices and rental rates. Hopefully, we’ll see some indications for a reversal in trend soon, so that we can finally see some good news in the market.
Read our other articles here:
- Moving from a 3-room flat to a bungalow overseas
- Why I spend $2.5K on renting a duplex condo every month
- Opinion: Should HDB regulate the sale of resale flats?
Cover image adapted from: TheSmartLocal, Artmuse Interior
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