Many people subscribe to the belief that property prices can only go up. It’s not hard to fathom why: Flash estimates show Housing and Development Board (HDB) resale prices surged 9.6 per cent in 2024, almost double the 4.9 per cent increase in 2023. The private housing market, while more subdued, still grew by 3.9 per cent.

The demand for resale HDB flats also remained strong, with transaction volumes increasing by 8.28 per cent, totalling 27,889 sales.

The government has intervened several times to prevent the resale HDB market from becoming overheated. Most recently in August 2024, the government tightened the loan-to-value (LTV) ratio for HDB loans to 75 per cent from 80 per cent, reducing the maximum amount that home buyers can borrow from HDB.

This came slightly a year after it doubled the additional buyer’s stamp duty (ABSD) for foreigners to 60 per cent. This cooling measure effectively curbed foreign capital inflows, leading to a sharp decline in new private non-landed property sales, which averaged 6,500 units per year from  2022 to 2024, compared with 12,820 new sales in 2021.

The government has also taken steps to ease demand pressures in the Build-To-Order (BTO) market, making a commitment to launch 100,000 flats between 2021 and 2025 to address housing shortages.

In October 2024, it introduced a major change to the BTO classification system, and increased subsidies to ensure low- and middle-income families could afford “Plus” and “Prime” flats in more desirable locations.

The government has signalled its willingness to step in again if property price growth outpaces economic fundamentals. Early last month, Minister for National Development Desmond Lee said the government is “not averse” to introducing more cooling measures, but will allow the current ones time to take effect. A week after that, Prime Minister Lawrence Wong reaffirmed that the government will “always keep public housing affordable for Singaporeans”.

While these assurances provide stability in the short term, a closer look at demand trends shaped by demographic shifts and deeper market forces suggests a more complex reality.

A MARKET ON THE RISE – BUT FOR HOW LONG?

Short-term demand drivers remain robust. Singapore’s population grew by 2 per cent to 6.04 million in 2024, with a notable increase in new marriages. From 2021 to 2023, roughly 28,000 marriages per year were registered. This rise in family formation could drive short-term demand in the housing market.

However, external macroeconomic factors could dampen demand. Rising geopolitical tensions and the ongoing conflicts in Ukraine and the Middle East contribute to global uncertainty. Donald Trump’s return to the White House has also raised concerns about trade protectionism, which could impact export-driven economies like Singapore.

Domestic housing markets, though local by nature, are not insulated against global economic risks, which, if compounded, could hurt housing price growth.

DEMOGRAPHIC SHIFTS POSE LONG-TERM QUESTIONS

In the longer term, three major demographic shifts could have significant impact on housing market demand and activities.

First, the rising number of singles in Singapore – particularly among those aged 25 to 34 – will drive up demand for smaller two-room flexi BTO flats. The revised housing framework now allows singles aged 35 and above to apply for these flats in all locations, expanding their options beyond non-mature estates under the previous housing framework.

Second, Singapore’s population is rapidly ageing. By 2030, one in four Singaporeans will be aged 65 or older, leading to growing demand for smaller flats with assisted living services. Many older homeowners may also seek housing monetisation options to help prepare them for rainy days in old age, especially those who are trapped in a “asset rich and cash poor” situation.

The chart below compares the demographic composition between 2000 and 2024, showing a growing “top-heavy” trend with an increasing proportion of older residents.

With these demographic trends unlikely to reverse, a comprehensive review of family-centric housing policies is essential to better address society’s evolving housing needs.

Third, Singapore’s resident total fertility rate fell below 0.97 in 2023, with just 33,541 babies born that year. This was a 5.8 per cent fall from the 35,605 babies born in 2022.

If this trend persists, the population could shrink in the coming decades, ultimately reducing demand for housing by new families in 20 to 30 years’ time.

While immigration could offset some of this decline, it remains a politically sensitive issue that requires careful management. A more immediate solution may be adjusting housing supply to align with shifting demographic patterns.

The assumption that property prices will always rise is not guaranteed. Property markets must be prepared for uncertainties and, hopefully, be resilient enough to avert unforeseen dips in housing prices if they come true in the long term.

This commentary was first published on CNA.