More homeowners take advantage of rising property values

As home prices peaked last year and the hot real estate market began to cool after successive rounds cooling measures, more private homeowners sold their property in Singapore.

According to real estate consultants, the number of transactions for non-landed homes, including executive condos, that have a holding period less than five years nearly quadrupled from 681 to 2,507 between 2023 and 2019.

This proportion also increased from 27% in 2022 to 28.9% in 2023.

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Gross profits from the sale of non-landed goods within a holding period of five years also increased.

Cushman & Wakefield’s research shows that median profits will increase by 33.5% to S$247,000 per year in 2023 from S$185,000 last year. This is a double-digit growth from S$123.241 in 2019.

Top researcher says gains have increased in tandem with prices of private non-landed houses, which have gone up by a total of 32 per cent during the past five year.

Data from January 2012 was used to study caveats on private non-landed houses with a history of prior purchases that had been made in the last five years.

The researchers then looked to see if the median profit for transactions with relatively shorter holding periods of less than five-years declined when property prices started to fall.

Analysts said that because of steep price hikes, more sellers cashed out earlier as the percentage of deals with shorter hold periods increased.

Some may have acted in anticipation of weaker prices coming next year.

Investors may also be cashing out due to a potential double hit of rising mortgage payments and high interest rates.

Rents have also fallen amid the influx of new completed projects in 2023.

In Q4 2023, according to latest data from the Urban Redevelopment Authority. Private home rents decreased by 2.1%. Rents rose 8.7% in the past year, a much slower rate than the 29.7% surge of 2022.

URA’s fourth-quarter data shows that home prices have also plateaued, increasing by 2.8 per cent in the quarter to 6.8 per cent over the entire year 2023. Comparatively, prices rose by 8.6 percent in 2022 and 11.6 percent in 2021.

Subsales also reached an 11-year peak in 2023 with 1,294 transactions of units held for short durations.

A subsale occurs when a buyer sells a property purchased directly from a developer before the completion of the project. The average project lasts less than 5 years.

Property analysts predict that in the next year, residential property deals which have a shorter holding period of less than five years will continue to make up a larger proportion of resales. This is especially true as long as interest rates are high.

This trend could reverse in 2025 as rents begin to recover and interest rates continue to decline.

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