As property prices rise, more homeowners are cashing out

The number of private property owners in Singapore who sold their homes last year increased as the home prices appeared to have peaked, and after successive cooling measures, the real estate market cooled down.

Data from a real estate consultancy shows that the number of non-landed private homes including executive condominiums with a minimum holding period of 5 years has nearly quadrupled, to 2,507 by 2023. This is up from 681 deals in 2019.

In 2023, the proportion of these deals in all resales or subsales that have a previous purchase history increased to 28,9 percent from 27,9 percent in 2022 and 25,4 per cent for 2019.

The gross profits on non-landed properties sold within a 5-year holding period have also increased.

Cushman & Wakefield reported that the median profit grew by 33.5 percent to S$247,000, up from S$185,000 in the previous year and more than doubled the S$123.241 recorded in 2019.

The gains were in line with the overall price of non-landed private homes which have risen by 32 percent cumulatively over the last five years.

Based on January 2012 data, the consultancy examined caveats that applied to private non-landed properties with a previous purchase history.

Then they looked at whether median profits of transactions that had a holding period less than five years decreased as the price growth in real estate began to slow.

Analysts have said that due to steep price increases there are more sellers who cash out sooner, and the proportion of deals which have shorter holding periods has increased.

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Some people may have bought in anticipation of lower prices in the next year.

Other investors may be choosing to cash in as they are facing a double-whammy due to an increase in mortgage payments due the progressive payment system and still high interest rates.

Rents also declined as a result of a number of new constructions scheduled for completion in 2023.

According to the latest data released by the Urban Redevelopment Authority (URA), private home rentals fell 2.1% in Q4 of 2023. Rents increased by 8.7% for the year. This is significantly lower than the 29.7% increase in 2022.

URA figures for the fourth quarter show that private home prices are also flattening, with a growth of 2.8 percent for the period and 6.8 percent for 2023. Prices increased by 8.6% in 2022, and 10.6% in 2021.

In 2023, the number of subsales reached a record high, with 1,294 transactions for units that were held only for a short time.

Subsales are recorded when a purchaser resells an item purchased directly from the developer before the project has been completed. A project is usually completed in less than five year.

Analysts predict that residential properties with holding periods shorter than five years could account for more resales or subsales in the future, particularly as interest rates continue to be high.

Rents are expected to start recovering in 2024-2026, and interest rates will continue to fall.