Singapore Quarter 4, 2024

Market commentary

A delicate balance

4Q 2024 AT A GLANCE

KEY HIGHLIGHTS

Residential
Singapore’s residential market saw a rise in transaction volume to 21,950 units in 2024, driven by strong primary sales in 4Q 2024. Non-landed prices rose 4.7% y-o-y, led by RCR and CCR. Rental rates fell 1.9% y-o-y, but transaction volume grew 4.7% y-o-y, indicating market stabilisation.

Investment
Singapore’s investment sales witnessed a dip in 4Q 2024 to S$6.5 billion. Nonetheless, total sales rose 28.7% y-o-y to S$25.2 billion for 2024 compared to 2023. While interest rate cuts have elevated investor confidence, investors are expected to take a more selective investment strategy in 2025 due to prevailing economic uncertainties.

Retail
Singapore’s retail sector remains resilient, bolstered by the recovery of tourism, high occupancy rates, and steady leasing demand. With continued rental growth and expansion in key sectors, Singapore’s retail sector remains a prime destination for global brands and investors.

Office
Singapore’s office market experienced an increase in overall occupancy to 95.0% in 4Q 2024, driven by demand in the CBD. Net absorption reached 420,000 sq ft NLA, with the CBD contributing 415,000 sq ft NLA. Both Premium and Grade A rents in the CBD remained stable for 2024.

ECONOMY

KEY INDICATORS

GDP Growth

Singapore’s economy grew 4.3% y-o-y in 4Q 2024, based on advance estimates. The economy grew by 4.0% in 2024, faster than the 1.1% growth in 2023. According to MTI, Singapore’s GDP growth is projected to be between 1.0 and 3.0% in 2025.

Inflation

Core inflation recorded a 1.9% in November 2024, recording its lowest growth in three years. According to MAS and MTI, overall inflation is expected to be 2.5% for the entirety of 2024, and to average between 1.5% and 2.5% in 2025.

Non-oil Domestic Exports

Non-oil domestic exports (3MMA y-o-y) was recorded at 2.4% growth y-o-y in December 2024. The growth in December 2024 can be attributed to the electronics products sector, which saw an 18.6% y-o-y increase.

International Visitor Arrivals

International Visitor Arrivals (IVA) reached 16.53 million, aligning with the upper range of STB’s 2024 forecast of 15 to 16.5 million visitors. This growth signifies a 21.5% increase in IVA in 2024 compared to 2023.

INVESTMENT
Strong investment momentum with strategic opportunities on the horizon

KEY HIGHLIGHTS

Investment Sales Sectorial Contribution (%)

Investment Sales (S$ billion)

Top 5 Private Investment Sales 4Q 2024 (S$ million)

Market Commentary

• In 4Q 2024, total investment sales in Singapore amounted to S$6.5 billion, marking a 20.3% q-o-q decrease from S$8.2 billion in 3Q 2024. Nonetheless, the total investment deals in 2024 increased by a substantial 28.7% y-o-y to S$25.2 billion, from S$19.5 billion in 2023.
• Five Government Land Sales (GLS) sites were awarded within the quarter, notably Tampines Street 95 (Executive Condominium), Faber Walk, Jalan Papan (Plot 5), Kallang Way, Lok Yang Way totaling S$1.26 billion.
• In the private sector, investment momentum has been driven by strong investor demand for industrial assets. Notable transactions include the sale of two Keppel data centres. The commercial market remained active too, with key transactions including the sales of Concorde Hotel and Shopping Centre and Katong Plaza.
• The residential sector saw the successful sale of Thomson View Condominium to a consortium comprising UOL Group, Singapore Land and Capitaland Development in November. This marks the only publicly disclosed successful residential collective sale in 2024.

Market Outlook

• While interest rate cuts improved investor sentiment in 4Q 2024, caution persists amid ongoing economic and geopolitical challenges, as well as uncertainty over further rate cuts in 2025. In the near term, investors are likely to remain selective, focusing on sectors with stronger growth potential for their investments.
• Among the investment real estate segments, the office market may face continued headwinds in 2025. Despite some stabilisation in financing costs, softening tenant demand and refinancing pressures could impact investor confidence, leading to asset repurpose or value adjustments.

RESIDENTIAL
Primary sales drive price growth in 2024

KEY HIGHLIGHTS

Residential Supply Pipeline

Property Price Index

Residential Sales and Launch Volume

Market Commentary

• The residential price index rose 3.9% in 2024, with 4Q 2024 contributing 2.3% q-o-q growth, driven by higher non-landed primary sales. The non-landed property index increased by 4.7% for the year, with a 3.0% q-o-q rise in 4Q, supported by transactions from selected projects.
• Within the non-landed segment, CCR prices rebounded with a 2.6% q-o-q increase in 4Q 2024, reversing the two previous quarters of decline to end the year 4.5% higher y-o-y. The RCR segment expanded 3.0% q-o-q, marking four consecutive quarters of growth and closing the year with a 5.8% y-o-y increase. In the OCR segment, prices remained stable for most of the year before climbing 3.3% q-o-q in 4Q 2024, resulting in a 3.7% y-o-y gain. Meanwhile, the landed segment recorded a 0.9% price increase for 2024, though prices in 4Q 2024 dipped slightly by 0.1% q-o-q.
• Transaction volume was recorded at 21,950 units for 2024, an increase of 15.3% y-o-y. Transaction activity rose in 4Q 2024, with total transaction volume rising 38.4% q-o-q to 7,433 units. Primary sales recorded 3,420 transactions in 4Q 2024, surpassing the combined volume from the first three quarters, reflecting improved buyer confidence following the first interest rate cut in September 2024. In contrast, secondary sales fell 4.7% q-o-q to 4,013 units, though full-year secondary sales volume rose to 15,481 units, up 22.6% from 2023.
• In the rental market, the overall rental index remained unchanged in 4Q 2024, but ending the year 1.9% lower y-o-y. Despite the y-o-y decline, rental transaction volume for 2024 increased by 4.7% y-o-y to 86,127 units, suggesting that the market has begun to stabilise as landlords and tenants close the gap on rental expectations.

Market Outlook

• For 2025, we can expect positive buyer sentiment to persist. Property price indices are expected to grow moderately in line with primary sale launches.
• With fewer completions anticipated in 2025, the pressure on supply will ease, supporting an uptick in residential rental rates in the year ahead.

RETAIL
Singapore’s retail sector is poised for sustained growth in 2025

KEY HIGHLIGHTS

Retail Prime Rental Rents

Retail Supply Pipeline (NLA)

Market Commentary

• International visitor arrivals (IVA) for 2024 reached 16.53 million, up from 13.6 million in 2023, hitting the Singapore Tourism Board’s full-year forecast of 15-16.5 million visitors. The tourism market remains on a recovery track. However, consumer sentiment remained cautious, and tourist spending was tepid.
• In 4Q 2024, island-wide occupancy rates rose to 93.8%, up from 93.5% in Q3, driven by demand in central areas. Orchard/Scotts Road saw a slight q-o-q increase to 93.7%, from 93.0%, while occupancy in Other City Area climbed to 93.2% from 92.2%. Meanwhile, the Fringe/Suburban Area saw a marginal q-o-q increase of 0.1 percentage point from 94.0% to 94.1% reflecting sustained demand in the suburban retail market.
• Prime first-storey rental rates along Orchard/Scotts Road rose by 0.2% reaching S$ 41.20 psf, supported by strong demand despite on-going challenges in the Fringe/Suburban retail markets where rental rates increased to S$ 34.20 psf. Rentals in Other City Areas rose to S$ 19.40 psf. The rental growth across there three submarkets were driven by rent increases and slight yield compression amid lower interest rates, marking the fourth consecutive quarter of growth.
• In the fourth quarter of 2024, several projects were completed that included significant allocations of retail space. Notably, Mandai Rainforest Resort at Mandai Lake Road with 18,299 sq ft of retail space, while Raffles Sentosa Singapore at Bukit Manis Road featured 9,688 sq ft. In the public sector, Punggol Coast Mall at Punggol Way contributed 182,986 sq ft of retail space, enhancing the area’s commercial offerings.

Market Outlook

• Singapore’s retail sector remains a magnet for global brands, supported by its status as a business and entertainment hub. Sectors such as athleisure, fitness and wellness, lifestyle retail, as well as food and beverage and entertainment are expected to sustain their growth and continue to drive leasing demand in 2025.
• As rental growth is expected to remain stable, this presents a favourable environment for investors seeking a yield spread over funding costs. This is particularly relevant in an elevated interest rate landscape where interest rate cuts may be more limited than anticipated.

OFFICE
CBD Premium and Grade A rents remain flat in 2024

KEY HIGHLIGHTS

CBD Premium and Grade A Office Net Absorption

Shadow Space (NLA) and Office Supply Pipeline

Average Office Rents and Occupancy Rates

Market Commentary

• Rental rates in Singapore’s central region declined 0.9% q-o-q in 4Q 2024, a larger decline compared to the 0.5% recorded in 3Q 2024. On a y-o-y basis, rental rates in the central region have remained unchanged in 4Q 2024, since their rise of 13.1% in 4Q 2023.
• Island-wide occupancy rates rose by 0.5 percentage points, ending the year at 95.0%. The higher occupancy levels can be attributed to the take up of office spaces in the CBD area, which saw occupancy rates rise to 94.1% in 4Q 2024 from 93.0% in 3Q 2024. In particular, IOI Central Boulevard saw a steady uptake of space, attracting firms from the banking & finance, tech and legal industries. Occupancy rates in the non- CBD and decentralised areas remained relatively unchanged in 4Q 2024 at 96.0% and 95.6%, respectively.
• Overall net absorption of office space across Singapore was recorded at 420,000 sq ft in 4Q 2024. The CBD area accounted for approximately 415,000 sq ft NLA in net absorption. In contrast, the non-CBD and decentralized areas recorded 27,000 sq ft NLA and negative 22,000 sq ft NLA in net absorption, respectively.
• Shadow space increased 16.2% q-o-q for the fourth consecutive quarter, reaching 436,000 sq ft, suggesting potential downsizing or relocation of office spaces by tenants in the near future.
• New office leasing contracts have been observed to favour smaller, more efficient office spaces, while demand for larger office spaces primarily come from existing tenants renewing their leases.

Market Outlook

• Looking ahead, Paya Lebar Green, which was set for completion in 2024, will be among several office upcoming developments in 2025. Leasing activity is expected to pick up in 2025 as indicated by increasing shadow space coinciding with new completions.
• In 2025, the increase in supply is likely to put downward pressure on rental rates for existing office spaces. With IOI Central Boulevard and Keppel South Central nearing full occupancy, the demand for CBD Premium and Grade A offices, may drive rental rates higher.

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Source: Edmund Tie & Company. Reproduced with permission.

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