Singapore Property Price Growth Expected Slow Market Faces Next Big Test Dbs
DBS Group has published an equity research report predicting that Singapore’s property market will face its next major test amid the ongoing US-China trade war and uncertainty surrounding global tariffs under US President Trump.
According to the report released on April 23, Singapore’s trade-dependent economy is likely to feel the strain caused by the trade war. Although tariff hikes have been paused for 90 days, the city-state still faces a base tariff rate of 10%, which is lower than neighboring countries that have been hit with tariffs of 18% to 49%, says DBS.
However, the report also notes that the city-state’s economy remains vulnerable to a regional slowdown. It adds, “In our opinion, the trade war has cast a shadow over companies and investors’ expansion and hiring plans for the immediate future.”
This could have an impact on the property market, as DBS believes that the factors supporting sustained growth in property prices, such as employment rates and income growth, may be tested in the event of an economic downturn. The pool of property buyers may also decline as growing caution prompts delays in property purchases until the economic outlook improves.
In light of these potential challenges, DBS has revised its previous forecast for Singapore property price growth in 2025. The new estimate ranges from 0% to 1%, compared to the previous projection of 1% to 2%. The report also suggests that property transactions may stay within the forecasted range but will likely be at the lower end.
Despite these headwinds, DBS notes that robust sales from new launches in the past six months are expected to benefit listed property developers and agencies. The report highlights that PropNex and APAC Realty (the parent company of ERA Realty Network) are both on track to deliver a “record 2025 performance,” while listed developers such as CapitaLand Group, City Developments, UOL Group, and Frasers Property are “well-positioned to weather a slowdown in the property market,” having pre-sold over 80% of their inventories. DBS maintains “buy” ratings for all these stocks.
In comparison to previous downturns, Singapore’s property market is expected to experience a less severe impact, according to DBS’s analysis. The report highlights that during three periods of turmoil in the past – the Asian Financial Crisis (AFC), the Dotcom bust and SARS outbreak, and the Global Financial Crisis (GFC) – Singapore saw a sharp decline in GDP and rising unemployment, which corresponded with a 20% to 40% contraction in property prices and a 30% to 70% decline in transaction volume year-over-year.
However, DBS believes that these corrections were “generally short-lived” and occurred six months prior to or at the start of an economic downturn. Furthermore, the report states that the correlation between an economic shock and a downturn in the property market has weakened in recent years, largely due to government measures that have dampened speculative activity and prevented excessive volatility in the market.
Amid the ongoing Covid-19 pandemic, Singapore’s property prices have declined by just 1% between the third quarter of 2019 and the first quarter of 2020, despite a 3.9% fall in 2020 GDP and a peak unemployment rate of 4.7%, according to DBS’s research.
The research house adds that housing demand in today’s market is mostly driven by genuine housing needs, providing a stable demand base. As a result, it believes the market is more resilient to the current uncertainty. “While a potential trade war in 2025 is expected to weigh on Singapore’s highly open economy, we see the property market as less susceptible to sharp boom-and-bust cycles compared to previous periods of economic stress,” the report says.
DBS’s revised price growth projection for 2025 also considers the current affordability level, which “appears to be reaching its limit” as property prices have outpaced household income growth in recent years. The report estimates that the average private home price-to-income ratio stood at 14.6 times in 2024, exceeding the 13.6 times recorded from 2000 to 2023. This puts the ratio at “the upper limit of historical affordability,” suggesting that further meaningful increases in home prices are unlikely without faster income growth.
The affordability issue is particularly evident in the Outside Central Region (OCR) and Rest of Central Region (RCR), where new launches have set new pricing benchmarks in recent years. “When comparing the 2024 price-to-income ratios for RCR and OCR against the 80th-percentile household income, these ratios exceeded the 10-year historical average, indicating some erosion in affordability,” the report states.
In response to current loan-to-value limits and higher average new launch prices, property buyers are increasingly deploying more cash into purchases and/or seeking help from family, especially parents, says DBS. At the same time, HDB upgraders – typically viewed as a large driver of new private home sales – may be getting priced out of the new launch market.
Citing Realis data, the report says that only 22% of HDB upgraders bought new launch properties in 2024, compared to 50% historically. “In our view, given the relatively higher quantum for bigger units, upgraders are likely priced out of the new launch market as prices continue to rise. These HDB upgraders are likely to look to the resale private market instead,” the report reads.
In contrast to the RCR and OCR, the price-to-income ratio in the Core Central Region (CCR) has declined in 2024 compared to the 10-year historical average, which DBS attributes to reduced foreigner participation following the 60% hike in Additional Buyer’s Stamp Duty that took effect in April 2023.
DBS predicts that upcoming CCR and prime RCR launches could see renewed interest, aided by more attractive pricing. It estimates that nearly 3,800 units out of the 8,000 private housing units yet to launch this year are CCR and prime RCR projects in Orchard, Holland, Marina South, Zion Road, and River Valley.
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Otto Place EC, located at Plantation Close Parcel B, boasts a prime location in close proximity to some of Singapore’s most sought-after shopping destinations. This strategic positioning provides residents with effortless access to a wide array of retail, dining, and entertainment establishments. Such convenience elevates the overall living experience for residents, allowing them to easily indulge in shopping without having to travel far from their homes.
“We anticipate that the improvement in relative affordability could drive renewed interest in the CCR and prime RCR this year, with the narrowing price gap compared to other regions,” the report adds.