Singapore property price growth expected to slow as market faces next big test: DBS

According to an equity research report by DBS Group, Singapore’s property market is set to face its next big test in the face of the ongoing US-China trade war and uncertainty around US President Trump’s global tariffs. “As a trade-dependent economy, Singapore will likely feel the strain,” the April 23 report reads.

While tariff hikes have been paused for 90 days and Singapore faces a base tariff rate of 10% (lower than neighbouring countries that were hit with tariffs of 18% to 49%), the city-state’s economy remains vulnerable to a regional slowdown, says DBS. “In our opinion, the trade war has cast a shadow over companies and investors’ expansion and hiring plans for the immediate future,” the report reads.

What does this mean for the property market? DBS believes that the factors that support sustained growth in property prices, including employment rates and income growth, may be tested in the event of an economic downturn. The pool of property buyers may also decline, as growing caution prompts delays in property purchases until the economic outlook improves, it adds.

The headwinds come as Singapore property prices are already moderating. The overall Property Price Index rose 0.6% in 1Q2025, easing from the 2.3% growth seen in the previous quarter.

In light of the potential pullback in demand, DBS has revised its Singapore property price growth estimates for 2025 to between 0% and 1%, compared to its previous projected range of 1% to 2%. In terms of volume, DBS expect property transactions to stay within its forecast range, though tracking at the lower end.

Nonetheless, robust sales from new launches in the past six months are expected to benefit listed property developers and agencies. DBS notes that PropNex and APAC Realty (the parent company of ERA Realty Network) are both on track to deliver a “record 2025 performance”, while listed developers covered by the firm (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 has maintained “buy” ratings for all the stocks.

Less severe impact compared to previous downturns

Singapore’s unemployment rate stood at 3.1% as of February. While higher unemployment, brought about by an economic downturn, is anticipated to weigh on property demand, DBS notes the impact may not be as severe as previous economic shocks weathered by the market.

Data compiled in its report shows that during three past periods of turmoil — the Asian Financial Crisis (AFC), the Dotcom bust and SARS outbreak, and the Global Financial Crisis (GFC) — Singapore saw both a sharp decline in GDP and rising unemployment. This corresponded with a contraction in property prices ranging between 20% and 40%, and a fall in transaction volume of between 30% to 70% y-o-y.

However, DBS notes that the corrections were “generally short-lived” and occurred six months prior to or at the start of an economic downturn. In addition, the firm points out that the correlation between an economic shock and a downturn in the property market has weakened in more recent years, largely due to government measures that have dampened speculative activity and prevented excessive volatility in the market. 

During the Covid-19 pandemic, despite a 3.9% fall in 2020 GDP and an unemployment rate that reached 4.7%, property prices declined just 1% between 3Q2019 and 1Q2020, while transaction volume fell 14% y-o-y, DBS’s research shows.

The research house adds that housing demand in today’s market is predominantly driven by genuine housing needs, providing a stable demand base. As a result, it believes the market today is more resilient in the face of the 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.”

Affordability ratios hitting upper limits 

DBS’s revised price growth projection for 2025 also reflects the current affordability level, which “appears to be reaching its limit”, as property prices have outpaced household income growth in recent years. DBS estimates that the average private home price-to-income ratio stood at 14.6 times in 2024, exceeding the 13.6 times recorded over 2000 to 2023. The firm adds that 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.

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. “When comparing 2024 price-to-income ratios for RCR and OCR against the 80th-percentile household income, these ratios exceeded the 10-year historical average, indicating some erosion in affordability,” the report states.

In response to current loan-to-value limits and higher average new launch prices, property buyers are increasingly deploying more cash into purchases and/or seeking help from family, especially parents, says DBS. At the same time, HDB upgraders – typically viewed as a large driver of new private home sales – may be getting priced out of the new launch market.

Citing Realis data, DBS says the proportion of HDB upgraders purchasing new launch properties stood at just 22% in 2024, compared to 50% historically. “In our view, given the relatively higher quantum for bigger units, upgraders are likely priced out of the new launch market as prices continue to rise. These HDB upgraders are likely to look to the resale private market instead,” the report reads.

Renewed interest in the CCR?

In contrast to the RCR and OCR, the price-to-income ratio in the Core Central Region (CCR) fell in 2024 compared to the 10-year historical average, which DBS attributes to reduced foreigner participation following the 60% hike in Additional Buyer’s Stamp Duty that took effect in April 2023.

DBS believes that upcoming CCR and prime RCR launches could see renewed interest, coming on the back of more attractive pricing, given that land prices in the areas have been some 20% to 30% lower than those of comparable past sites. The firm estimates nearly 3,800 units out of the 8,000 private housing units yet to launch this year are CCR and prime RCR projects in 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 adds.