Nus Real Estate Survey Points Improving Market Sentiment Among Industry Leaders
Real estate industry confidence in Singapore improves in Q4 2021
According to the most recent Real Estate Sentiment Index (RESI) released by the National University of Singapore (NUS), the local real estate market has seen an improvement in sentiment during the first three months of this year, after turning the corner in the last quarter of 2023.
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The quarterly survey is conducted by the NUS Department of Real Estate and the Institute of Real Estate and Urban Studies, and is based on the opinions of senior executives from real estate firms. RESI consists of a Current Sentiment Index and a Future Sentiment Index, which track changes in market sentiment over the past and upcoming six months respectively.
In the first quarter of 2024, the Current Sentiment Index increased to 4.7, up from 4.4 in the previous quarter. For the first time in five consecutive months, the Future Sentiment Index rose above the neutral score of 5.0, reaching 5.1.
“Overall, Singapore’s macroeconomic indicators continue to hold up well and suggest a healthy economy that is expected to recover in the year ahead, barring any unforeseen shocks,” said Professor Qian Wenlan, Director of the NUS Institute of Real Estate and Urban Studies.
She also noted that the strong Singapore dollar has assisted in easing inflation, with core inflation for March decreasing to 3.1% year-on-year from 3.6% in February, while headline inflation for March dropped to 2.7% year-on-year from 3.4% in February .
One survey respondent mentioned “healthy household balance sheets and the prevailing low unemployment rate” as factors expected to continue supporting demand and prices in the housing market.
NUS reported that in 2023, the net worth of households grew by 8.9% to reach $2.80 trillion, up from $2.57 trillion the previous year, while the unemployment rate remained low at around 2%, in line with the decreasing rate of retrenchments in the first quarter of 2024.
The majority of real estate industry leaders continue to hold a significantly positive outlook towards the local hotel and serviced apartment sector, followed by a relatively milder outlook for the suburban retail sector. However, survey respondents had a negative outlook on the overall performance of the prime residential market.
Furthermore, 73.5% of respondents in the first quarter of 2024 survey indicated that a slowdown or decline in the global economy was the top potential risk that could have a negative effect on sentiment over the next six months. This is a considerable decrease from 90% in the third quarter of 2023.
“Economic recovery is a key factor in the health of the property market. We are also concerned about the potential oversupply of residential apartments as the government increases the supply of Government Land Sales (GLS) in the past few quarters. Potential cooling measures are also a concern,” cited one survey respondent.
About 29.4% of respondents raised concerns about increased development land supply, up from 23.7% in the previous quarter. Job losses and a decline in the domestic economy continued to rank as the second highest area of concern at 55.9%, slightly decreasing from 57.9% in the last quarter. Rising inflation and interest rates followed at 50.0%, an increase from 44.7% in the fourth quarter of 2023.
Meanwhile, the risk of government intervention in the market and a real estate price bubble ranked the lowest at 11.8% and 2.9%, respectively.
Looking ahead, about 22.2% of the developers surveyed expect new launch unit prices to be moderately higher in the next six months, down from 42.9% in the fourth quarter of 2023. On the other hand, 72.2% expect new launch prices to remain at the same level, a substantial increase from 47.6% in the previous quarter.
The remaining 5.6% expect unit prices to be moderately lower.
“Home buyers have become more resistant to high price points and have become more discerning with the abundant new project options available. While developers are expected to adopt sensitive pricing strategies, major price corrections are unlikely due to previously committed land and development costs,” said a survey respondent, adding that healthy household balance sheets and the prevailing low unemployment rate are also expected to continue supporting demand and prices.