Singapore's Private Residential Market: A Domestic-Driven Recovery in 2025

The Singapore private residential market is undergoing a quiet transformation. While luxury property prices in the Core Central Region (CCR) struggle with oversupply and cooling foreign demand, non-luxury segments—particularly the Outside Central Region (OCR) and Rest of Central Region (RCR)—are emerging as bright spots. A confluence of factors, including rising domestic buyer activity, declining interest rates, and spillover demand from Singapore's robust HDB resale market, positions 2025 as a strategic entry point for long-term investors.

The Rise of Domestic Demand

Foreign buyers, once a key driver of Singapore's luxury real estate boom, have all but vanished from the market. High Additional Buyer's Stamp Duty (ABSD) rates (60% for foreigners) and tighter lending rules have stifled foreign investment, reducing their share of new sales to just 2% and resale purchases to 1.4% in early 2025. In contrast, Singaporean and permanent resident buyers now dominate transactions, particularly in mid-tier markets.

This shift is evident in regional price trends:
- OCR and RCR non-landed prices rose 0.9% and 1.1% in Q2 2025, respectively, while CCR prices grew a meager 0.5%.
- Executive Condominium (EC) sales surged to 830 units in Q1 2025, up from 528 in late 2024, as first-time buyers capitalize on affordable pricing and government incentives.

Interest Rates and Affordability

Lower interest rates are further fueling demand. The Monetary Authority of Singapore's (MAS) gradual easing of policy rates since mid-2024 has reduced mortgage costs, making home purchases more affordable. For instance, a buyer with a S$1 million loan at 4.5% interest (the average rate in 2023) would now save S$12,000 annually if rates drop to 3.5%. This affordability boost has spurred activity in OCR/RCR, where resale transactions rose to 3,565 units in Q1 2025, accounting for nearly half of all sales.

The HDB Resale Spillover Effect

Singapore's HDB resale market is indirectly powering private sector demand. The HDB Resale Price Index rose 8.07% year-on-year in late 2024, narrowing the affordability gap with private housing. This has driven a wave of “upgraders” moving from public to private housing, particularly in OCR/RCR, where prices remain 30–40% below CCR levels.

Supply and Demand Balance

The government's GLS (Government Land Sales) program ensures supply meets demand without over-saturating the market. In 2025, 8,505 private units will be allocated—60% higher than the 2021–2023 average—along with 2,000 EC units targeting first-time buyers. This balanced supply pipeline, combined with a decline in unsold inventory (to 19,604 units as of Q1 2025), supports price stability.

Investment Implications

For investors, the focus should be on OCR/RCR developments and ECs:
1. Geographic Focus: Prioritize OCR and RCR projects, where demand is strongest and vacancy rates are lowest (OCR's vacancy rate dipped to 4.7% in Q2 2025).
2. Developers to Watch: Look for firms with strong track records in mid-tier housing, such as GuocoLand and CapitaLand, which have been active in OCR/RCR markets.
3. Long-Term Hold: Given Singapore's structural housing shortage (56,700 units in the pipeline by 2027), long-term rental yields (currently 2.5–3%) and price appreciation potential make this a solid buy-and-hold opportunity.

Risks to Consider

• Luxury Oversupply: The CCR's 10.3% vacancy rate and weak foreign demand make it risky for speculative purchases.
• Interest Rate Volatility: While rates are expected to stay low, any abrupt hikes could dampen affordability.

Conclusion

Singapore's private residential market is undergoing a healthy rebalancing. With domestic buyers now driving growth, interest rates favoring affordability, and a disciplined supply pipeline, 2025 presents a compelling entry point for investors targeting OCR/RCR assets and ECs. While luxury markets remain challenged, the broader market's resilience—bolstered by strong local demand—makes this a sector worth watching for the next decade.