Singapore Property Price Growth Expected Slow Market Faces Next Big Test Dbs

To counter the current state of affairs, many property developers are launching new projects in Singapore’s property market, which faces its next major challenge in the face of the ongoing trade war between the United States and China, as well as the uncertainty surrounding President Trump’s global tariffs. In an equity research report dated April 23, DBS Group predicts that “as a trade-dependent economy, Singapore is likely to feel the strain”. While the current implementation of tariffs is paused for a period of 90 days, Singapore still faces a basic tariff rate of 10%, which is lower than the rate imposed on some of its neighboring countries, ranging from 18% to 49%. However, the report notes that Singapore’s economy remains vulnerable to a regional slowdown.

According to DBS, “the trade war has cast a shadow over companies and investors’ expansion and hiring plans for the immediate future.” This could have implications for the property market. DBS believes that factors such as employment rates and income growth, which have supported sustained growth in property prices, may be put to test in the event of an economic downturn. Furthermore, growing caution may also lead to a decline in the pool of property buyers, as they delay their purchases until the economic outlook improves.

In light of the potential decline in demand, DBS has revised its estimates for property price growth in 2025 to a range of 0% to 1%, compared to its previous projection of 1% to 2%. It also expects property transactions to stay within its forecast range, although at the lower end. However, DBS notes that despite these headwinds, robust sales from new launches in the past six months are expected to benefit listed property developers and agencies. In particular, DBS highlights that PropNex and APAC Realty (the parent company of ERA Realty Network) are on track to deliver a “record 2025 performance”, while listed developers covered by the firm, 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 a “buy” rating for all these stocks.

However, the impact of the trade war and economic uncertainty on Singapore’s property market may not be as severe as previous downturns, according to DBS. The firm points out that during three past periods of turmoil – the Asian Financial Crisis, the Dotcom bust and SARS outbreak, and the Global Financial Crisis – Singapore saw a sharp decline in GDP and rising unemployment, which corresponded with a 20% to 40% contraction in property prices and a fall in transaction volume of 30% to 70% year-on-year. However, these corrections were generally short-lived and occurred six months prior to or at the start of an economic downturn. Furthermore, the correlation between an economic shock and a downturn in the property market has weakened in recent years due to government measures that have dampened speculative activity and prevented excessive volatility in the market.

For instance, during the Covid-19 pandemic, despite a 3.9% fall in 2020 GDP and an unemployment rate that reached 4.7%, property prices declined by just 1% between 3Q2019 and 1Q2020, while transaction volume fell by 14% year-on-year. DBS also notes that housing demand in today’s market is predominantly driven by genuine housing needs, providing a stable demand base. Thus, the firm believes that the market is more resilient in the face of 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.”

However, DBS has revised its price growth projection for 2025, reflecting the current affordability level, which “appears to be reaching its limit” as property prices have outpaced household income growth. According to DBS, 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.

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The affordability squeeze 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. According to DBS, the price-to-income ratio in RCR and OCR exceeded the 10-year historical average in 2024, indicating some erosion in affordability. This has led to property buyers increasingly deploying more cash into purchases and seeking help from family, especially parents. At the same time, HDB upgraders, who are typically viewed as a large driver of new private home sales, may be getting priced out of the new launch market. This is evident from Realis data, which indicates that the proportion of HDB upgraders purchasing new launch properties has declined to 22% in 2024 from the historical average of 50%. According to DBS, this is due to the relatively higher quantum for bigger units, which has priced out upgraders from the new launch market. These HDB upgraders are likely to turn to the resale private market instead.

In contrast to the RCR and OCR, the price-to-income ratio in the Core Central Region (CCR) declined in 2024 compared to the 10-year historical average. DBS attributes this decline to reduced foreigner participation following the 60% hike in Additional Buyer’s Stamp Duty that took effect in April 2023. DBS believes that with more attractive pricing, upcoming launches in CCR and prime RCR could see renewed interest, given that land prices in these areas are about 20% to 30% lower than comparable past sites. The firm estimates that nearly 3,800 units out of the 8,000 private housing units yet to launch this year are located in CCR and prime RCR areas such as Orchard, Holland, Marina South, Zion Road, and River Valley. “We anticipate that the improvement in relative affordability could drive renewed interest in CCR and prime RCR this year, with the narrowing price gap compared to other regions,” the report concludes.