The year 2024 could present a promising opportunity for first-timers looking to make a move in the private residential market. 

After a few years of price escalation, home prices have stabilised. Prices are set to grow at a more modest pace this year, providing for more predictable and potentially favourable buying conditions. 

Central banks may soon shift their focus to rate cuts, which will reduce borrowing costs and improve housing affordability. We can also expect to see a significant supply ramp-up, due to the completion of several condominium projects in 2023 as well as a slate of new project launches this year. 

The Government’s cooling measures have also effectively curbed the influx of foreign buyers and short-term investors — creating a conducive environment for genuine buyers, especially first-timers, to enter the market. 

With careful research and planning, first-time private-home buyers could take advantage of changing trends to find a home that meets their needs and budget. Here are some key factors they should first consider.

MORE SUPPLY IN THE SUBURBS

New suburban homes have been scarce in recent years, but 2024 will be bringing more supply to the market, especially in the suburbs. 

Around 30 projects are expected to launch in 2024, adding over 12,000 new units to the market, excluding executive condominiums (ECs). Even if launches are staggered or delayed due to unforeseen circumstances, we anticipate at least 23 project launches yielding up to 8,800 new private homes. This is 16.5 per cent higher than the total number of launched units in 2023.

Housing and Development Board upgraders seeking private homes can look forward to a significant increase in the supply of new homes in the suburbs or Outside of Central Region (OCR), including the 512-unit Lumina Grand EC at Bukit Batok West Avenue 5. ECs are usually the most affordable new housing options in today’s market. 

More than 4,400 units (excluding ECs), or around 50.5 per cent of the anticipated total new units, will be in the OCR — the highest proportion of units launched in the OCR since 2017. In comparison, only 2,688 new suburban homes were launched for sale in 2023, and 1,669 in 2022.

Some high-profile projects to watch include the 440-unit SORA in Jurong East, the 533-unit Lentor Mansion, and the 345-unit Government Land Sales site at Champions Way in Woodlands. 

RESALE PRICES OF NEW UNITS SET TO RISE

Some househunters may prefer newly completed homes over other resale options, due to the longer lease and new furnishings, among other reasons. This group will also have a wider range of choices: Excluding ECs, approximately 20,000 units received their Temporary Occupation Permits in 2023. An additional 9,636 units are expected to be completed in 2024. 

The good news for buyers is that majority of these units are in the OCR — 12,546 units, or 42.4 per cent of total completed units. Another 34.8 per cent or 10,293 units will be in the city fringe or Rest of Central Region (RCR). 

However, potential buyers should be prepared for a decrease in supply in the coming years. From around 10,000 new completions this year, the number is expected to drop to approximately 5,492 units in 2025 and 6,896 units in 2026. 

The decreased supply could later exert some upward pressure on prices, and potential buyers may have to pay more for a newly completed resale home next year. 

PRICE TRENDS: NEW HOMES VS RESALE 

Prices of new homes are largely projected to hold steady in 2024. In some cases, there may be a slight increase of around 2 to 4 per cent compared to 2023, as certain projects may command higher prices due to their exclusive product offerings or prime locations. 

As a price gauge, the median price of new condos in the OCR in 2023 was S$2,113 per square foot (psf), and S$2,511 psf in the RCR. This means that a new three-bedroom unit of about 1,000 square feet in the suburbs was typically sold for above S$2 million, while a city-fringe unit cost around S$2.5 million. 

Based on the impending drop in supply, we expect resale prices to rise by a faster clip of 3 to 5 per cent compared to new homes. In 2023, the median price of resale condos in the OCR was about S$1,378 psf, while in the RCR it was S$1,702 psf. 

Buyers paid a median price of S$1,644 psf for a newer resale condo (less than 10 years old) in the OCR while a similar one in the RCR cost about S$2,062 psf.  

WEIGHING AFFORDABILITY

Price trends aside, buyers will have to assess overall affordability. Those purchasing new private homes as first-timers do not incur Additional Buyers’ Stamp Duty (ABSD) — however, there are other transaction costs such as stamp duties, legal fees and other miscellaneous costs, which may go upwards of S$10,000 in addition to the down payment and monthly instalments. 

If a first-time homebuyer is considering an EC or condo in the secondary market valued at S$1.4 million, they have to make a minimum down payment of 25 per cent, which amounts to S$350,000. Out of this amount, they must pay 5 per cent of the total price (or S$70,000) in cash, while the remaining balance (S$280,000) can be paid through their Central Provident Fund monies. 

As for the remainder of S$1,050,000, assuming a 25-year loan with an interest rate of 3.5 per cent, this will result in a monthly mortgage payment of approximately S$5,257. 

Second-time homebuyers — those who already own one property and wish to purchase a private home — will be subjected to the ABSD. Assuming these buyers are Singaporean citizens who do not intend to keep their first property, they will still have to pay a 20 per cent ABSD upfront. Upon selling their first property within six months of taking possession of the new unit, they can then apply for an ABSD reimbursement. 

OTHER CONSIDERATIONS

It is important for homebuyers, especially first-timers, to evaluate their financial position and determine whether the cost of a property purchase will significantly deplete their life savings before making any decisions. 

For those taking out loans, the Total Debt Servicing Ratio limits the amount one can borrow, while the Mortgage Servicing Ratio caps the borrowing limit at 30 per cent of the borrower’s gross monthly income for those purchasing new ECs. 

It is not advisable to max out one’s borrowing limits even if one passes the debt servicing assessments. Instead, buyers should maintain some liquidity buffers to prepare for a potential financial downturn, job loss, or other unforeseen stressful events. Additionally, they should set aside an emergency fund of about six months’ worth of expenses and mortgage repayments, which can be kept in low-risk, liquid investments, cash, or easily accessible funds.

For young families, it is highly recommended to allocate a portion of their budget towards crucial expenses such as home repair, maintenance costs, insurance, and utilities. Childcare fees, enrichment classes and paediatric consultations are other expenses that can add up significantly over time.

While market conditions look favourable at present, given the uncertain economic climate, it is important for buyers to remain prudent. By being mindful of all factors involved and budgeting accordingly, buyers can be well prepared for any financial challenges should they make a private home purchase this year. 

ABOUT THE AUTHOR:

Christine Sun is the chief researcher and strategist at OrangeTee Group.