In Q2, Singapore property players were more bullish about interest rate cuts: NUS poll

The study found that 73.1% of respondents consider a global economic downturn the biggest concern.

Aug 29, 2024

According to a poll by the Institute of Real Estate and Urban Studies (Ireus) at the National University of Singapore, property market sentiment improved in the second quarter.

Ireus said market sentiments were consistent and cautiously upbeat as the market expects economic performance to improve in the second half of the year despite global turmoil.

“The economic fundamentals here are sound, and in tandem with the upcoming easing of interest rates, we would expect overall market sentiment to improve further over time,” said Ireus director Professor Qian Wenlan, citing the Ministry of Trade and Industry's advanced estimates of 2.9% year-on-year GDP growth in Q2.

The Current Sentiment Index, which tracks sentiment over the last six months, bottomed out at 4.2 in Q3 2023 and rose to 4.8 in Q2 2024 from 4.7.

In Q2, the Future attitude Index, which analyses attitude changes over the next six months, maintained at 5.1, indicating higher optimism than the 4.5 three quarters earlier.

In Q2 2024, the Composite Sentiment Index, which includes the Current and Future Sentiment Indexes, stayed at 4.9, below the neutral score of 5.

Prof. Qian said the market has been cautious due to uncertainty.

"In addition to geopolitical conflicts, the stock market rout of Aug 5 earlier this month was triggered by fears of a US recession, which could spread worldwide in a hard landing," she said.

Top dangers

73.1 percent of respondents saw a global economic downturn as the greatest danger, while 46.2% cited increased building prices as a risk to mood over the next six months.

Third, 38.5% of respondents cited employment losses or domestic economic decreases and increasing development land availability.

Prof. Qian added, “There is, however, a silver lining amid such a grim landscape, since the US Federal Reserve has reversed its stance on interest rates and indicated that it will likely ease monetary policy

She said lower interest rates and more credit might lower corporate expenditures, reducing worries about growing prices.

Other negative variables may affect market mood include excessive new property releases, increasing from 26.5% in Q1 to 34.6% in Q2.

30.8 percent of respondents worried about government involvement to temper the market, up from 11.8 percent in Q1.

Tightening finance and liquidity in the market and increasing inflation and interest rates dropped from 47.1% in Q1 to 19.2% in Q2, and from 50% to 19.2%.

In Q2, only 7.7% of respondents saw a real estate price bubble danger, up from 2.9% in Q1.

By sector

With a 42% negative net current balance in Q2, premier residential and business park/hi-tech area performed worst.

In terms of future net balance, premier residential was -27% and business park/hi-tech was -23%.

Sing Tien Foo, provost's chair professor of real estate at NUS Business School, said that the slowdown in premium private house sales and increased vacancy in business parks may have hampered the two sectors. “More headwinds will be expected in these sectors, with uncertainty on interest rates and the global economic climate ahead.”

Current and prospective net balance percentages show emotion. Their basis is the gap between poll respondents' positive and negative choices.

Office net balance was negative 19%, but future net balance was the worst at negative 38% in Q2.

Respondents indicated “office and logistics rental growth (are) tepid as economic tardiness is crimping business confidence, while cost concerns remain high on the agenda.”

Suburban residential and industrial/logistics sectors continued to have negative current and prospective net balances in Q2.

Suburban retail and hotel/serviced apartments were the only sectors with positive present and prospective net balances.

Prime retail has a negative 8% current net balance and neutral future net balance.

Developer expectations

In Q2, 56.2% of developers predict a considerably or significantly larger number of new project launches in the next six months, while 31.3% expect the same. Only 12.5% expect fewer launches.

25% of developers expect new launch prices to be moderately higher, up from 22.2% in Q1. About 75% predict prices to stay the same. None expect unit prices to fall this quarter.

A respondent said: “Homebuyers are more discerning and price-sensitive with more options. Developers may change prices, but committed costs make large changes unlikely.

In Q2, 87.6% of developers reported land prices as their primary worry, down from 88.9% in Q1.

Other major issues are labour (81.2%), funding (81.2%), construction supplies (75%), and professional services (56.2%).

The Real Estate Sentiment Index is based on a survey of senior executives from developers, consultancies, financial institutions, professional companies, and service providers in Singapore.