Why Half of Singaporean Property Seekers Struggle to Buy Their First Home in 2023

Why Half of Singaporean Property Seekers Struggle to Buy Their First Home in 2023
Why Half of Singaporean Property Seekers Struggle to Buy Their First Home in 2023

In 2023, housing affordability in Singapore is a hot topic. This has been the year where we saw the most expensive HDB resale flat transaction ever: $1.5 million for a Tiong Bahru flat with about 49 years remaining on its 99-year lease. And just recently, August 2023 set the record for the most number of million-dollar HDB flat transactions in a month.

These property market conditions follow price trends: In Q2 2023, HDB resale prices had reportedly grown for 13 consecutive quarters. In this climate, it is understandable that some Singaporeans are finding it challenging to buy a property. In fact, the PropertyGuru Singapore Consumer Sentiment Study H2 2023 reports that over half or 51% of Singaporean property seekers say it is difficult to buy their first home. But why, let’s find out.

Study: More Singaporeans Want to Buy a Home Soon

Before we deep dive into the reasons for the barriers to homeownership, let’s understand more about the preferences of first-time home buyers.

Of those surveyed in the latest CSS H2 2023, 64% of Singaporeans intend to buy a house. The most popular property type among first-time home buyers is a BTO flat (31%), followed by an HDB resale flat (25%), and newly launched non-landed private property (15%).

Of those who want to buy a house, 45% said they hope to do it in the next two years – up from 38% in the PropertyGuru Singapore Consumer Sentiment Study H1 2023.

One of the reasons why more Singaporeans are expressing a greater demand to buy a property is the series of recent government announcements about increased housing land supply. Numbers-wise, Dr Tan Tee Khoon, Country Manager – Singapore, PropertyGuru shares that an estimated 100,000 private homes and HDB BTO flats are expected to be completed between 2023 to 2025.

“The projected number of private housing units (including Executive Condominiums (ECs)) in the Government Land Sales (GLS) Confirmed List for H2 2023 was ramped up by 26% to 5,160 units, as compared to the 4,090 units in H1 2023. Of the eight Confirmed sites announced, four could yield between 500 to 595 units each, while another three could deliver between 775 to 955 units each. Only one site was a modest 270-unit plot.

These GLS sites are expected to debut for sale within 15 to 18 months, giving more choice to property seekers planning to purchase within the next two years.”

Singaporeans Find it Difficult to Buy their First Home in 2023

Of the homebuyers surveyed, 51% struggle to buy their first home. This sentiment is strongest among singles at 55%, followed by married couples with children at 49%.

What are the challenges Singaporean property seekers are facing?

1. High Property Prices

It comes as no surprise that one of the reasons why 51% of Singaporeans struggle to buy a property in 2023 is… *drumroll* high property prices.

Buying a property in Singapore costs at least a six-figure sum, and can easily go into seven figures for larger homes and in better locations. And HDB resale flats are not the only property type that has seen tremendous price growth: New condos are now seeing a price norm of $2,000 per sq ft (PSF), regardless of location. This was observed in our latest Singapore Property Market Report Q3 2023.

Money is a big consideration, especially for married couples who need to consider the costs involved in raising their children and planning for their education. Other factors include deciding between getting home immediately, renting temporarily, and living with in-laws.

2. High Singapore Mortgage Rates

On top of high property prices, the current high interest rate environment means property buyers have to be extra careful when budgeting for their homes.

As of 4 September 2023, the 3M SORA rate was 3.696%. Similarly, floating home loan rates reflected when using PropertyGuru Finance home loan comparison tool range between 4.19% to 4.69% (accurate as of 15 September 2023).. This is in comparison to during the COVID-19 pandemic when home loan interest rates were in the 1% to 2% range.

It is important to note that since H2 2023, Singapore mortgage rates have been moving sideways. Regardless, given the current home loan interest rate environment, potential homeowners may be hesitant to buy a home, due to the high costs of financing a property (i.e. high monthly home loan payments).

3. Inflation and High Cost of Living

Singapore does not exist in a bubble, and US Fed interest rates, which are currently at a 22-year high, do not only remain impactful to Americans. Everything else has been getting more expensive, as is the case with inflation.

It gets more expensive to ship supplies to Singapore, including construction materials and necessities like food. Because commercial rents are also more expensive, businesses and even hawker centres need to charge more for goods and services, so that they too, can stay afloat.

When everything rises, Singaporeans experience higher costs of living. This, especially for married Singaporeans with children (and perhaps, also ageing parents), becomes a concern as the increased prices of diapers, childcare, healthcare, transport and more all add up.

Based on these points, it’s no wonder more than half of Singaporean first-time homebuyers feel it’s a challenge to afford a home!

What can Singaporean Property Seekers Do?

Acknowledging the economic impact on Singaporeans, the Government has stepped in with subsidies such as higher CPF Housing Grants for eligible first-timer families and singles buying HDB resale flats. This was announced during the Budget 2023 statement.

Increased CPF Housing Grants for resale flats can help alleviate some financial burdens among young couples and singles who need a home quickly, but are unable to buy from the current HDB resale market due to high asking prices.

The Budget 2023 statement also introduced additional BTO ballots for eligible First-Timer (Parents & Married Couples), or FT(PMC), a newly introduced priority homebuyer profile. This was announced on the heels of high BTO application rates. Case in point: The Serangoon May 2023 BTO project was oversubscribed, to the tune of 13.3 for 5-room BTO flats (i.e. more than 13 applicants per home launched).

As for the struggles singles face when buying their first home, Dr Tan Tee Khoon believes the implementation of the National Day Rally 2023 announcements will alleviate some woes around housing accessibility for them.

“From the second half of 2024, singles can apply for 2 room Flexi units across all BTO projects under the new Standard, Plus and Prime classification. As BTO flats remain the top property choice for Singaporeans, this move will enable more singles to secure their first home in choice locations,” said Dr Tan.

Hopefully, such government support will help soothe some of the concerns among Singaporean homebuyers. However, it is noteworthy that a good portion of them have not been implemented yet. Therefore, it will likely take a while before Singaporeans can feel their tangible effects.

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