Nus Real Estate Survey Points Improving Market Sentiment Among Industry Leaders

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According to the recently published Real Estate Sentiment Index (RESI) by the National University of Singapore (NUS), the first three months of 2024 saw an improvement in sentiment towards the local real estate market, after turning the corner towards the end of 2023. This quarterly market survey is produced by the university’s Department of Real Estate and the Institute of Real Estate and Urban Studies, and is based on the opinions of senior executives in the real estate industry. The index comprises a Current Sentiment Index, which tracks changes in market sentiment over the past six months, and a Future Sentiment Index, which measures expectations for the next six months. In the first quarter of 2024, the Current Sentiment Index rose to 4.7, up from 4.4 in the previous quarter. Meanwhile, the Future Sentiment Index went above the neutral score of 5.0 for the first time in five consecutive months, reaching 5.1. “Overall, Singapore’s macroeconomic indicators remain strong, which suggests a healthy economy that could continue to recover in the coming year,” says Professor Qian Wenlan, director of the NUS Institute of Real Estate and Urban Studies. She notes that the strong Singapore dollar has also helped to ease inflation, with core inflation dropping to 3.1% year-on-year in March, from 3.6% in February, and headline inflation slowing to 2.7% year-on-year in March, from 3.4% in February. A respondent in the survey cited healthy household balance sheets and a low unemployment rate as factors that would continue to support demand and prices in the housing market. According to NUS, household net worth grew by 8.9% in 2023, reaching $2.80 trillion, up from $2.57 trillion the previous year. In addition, the unemployment rate remained low at around 2%, in line with a decrease in retrenchments in the first quarter of 2024. Real estate industry leaders remain optimistic about the hotel and serviced apartment segment, followed by a relatively positive outlook for the suburban retail sector. However, they have a much poorer outlook on the general performance of the prime residential market. About 73.5% of respondents in the 1Q2024 survey cited a slowdown or decline in the global economy as the top potential risk that could negatively affect sentiment in the next six months, a considerable decrease from 90% in 3Q2023. “Economic recovery is a crucial factor in the health of the property market. We are also concerned about the potential oversupply of residential apartments as the government continues to increase the supply of land through the Government Land Sale (GLS) programme in recent quarters. Potential cooling measures are also a concern,” says a survey respondent. About 29.4% of respondents cited concerns about an increase in the supply of development land, up from 23.7% in the previous quarter. The second highest area of concern was job losses and a decline in the domestic economy, which decreased slightly from 57.9% in the last quarter to 55.9%. This was followed by rising inflation and interest rates, cited by 50.0% of respondents, up from 44.7% in 4Q2023. In contrast, the risk of government intervention in the market and a real estate price bubble ranked much lower at 11.8% and 2.9% respectively. Looking ahead, 22.2% of developers surveyed expect prices of new launches in the next six months to be moderately higher, down from 42.9% in 4Q2023. On the other hand, 72.2% expect prices to remain at the current level, a significant increase from 47.6% in the previous quarter. Only 5.6% of respondents expect prices to be moderately lower. “Home buyers have become more resistant to high price points and are more selective with the numerous new project options available. While developers are expected to adopt more sensitive pricing strategies, major price corrections are unlikely due to previously committed land and development costs,” says a survey respondent. They add that healthy household balance sheets and a low unemployment rate are also expected to continue supporting demand and prices.