Singapore's Residential Market Recovery: Why OCR and RCR Offer the Best Valuation Plays

The Singapore private residential market is at a crossroads. While the luxury-oriented Core Central Region (CCR) faces valuation headwinds, the Rest of Central Region (RCR) and Outside Central Region (OCR) are emerging as compelling investment opportunities. Supported by narrowing price gaps with HDB resale flats, sustained secondary sales, and the looming prospect of interest rate cuts, these segments offer a strategic entry point to capitalize on 2025's projected recovery.

Valuation Disparities: OCR/RCR Are Undervalued Compared to Cooling CCR

The CCR's premium pricing has cooled significantly. In Q2 2024, non-landed CCR prices declined by 0.2% quarter-on-quarter (QoQ), while OCR and RCR prices rose 0.3% and 2.2%, respectively. By Q1 2025, CCR prices stagnated at a 0.8% QoQ increase, lagging behind RCR's 1.7% and OCR's 0.3% gains. This divergence reflects structural shifts in demand:

• Foreign Buyer Retreat: The CCR's reliance on foreign investors—now deterred by a 60% ABSD rate—has left it vulnerable. Foreign purchases fell to 2% of new sales in 2024, while domestic buyers dominate OCR/RCR transactions.
• Affordability in OCR/RCR: Non-landed properties in these regions trade at a 30–40% discount to CCR equivalents, making them accessible to Singaporeans upgrading from HDB flats.

Narrowing Price Gaps with HDB: A Catalyst for Demand

HDB resale prices have surged, closing the gap with private housing. The HDB Resale Price Index rose 8.07% year-on-year (YoY) in Q3 2024, while OCR/RCR private non-landed prices grew only 1.88% YoY. This creates a sweet spot for upgraders:

• Affordable Entry: A 4-room HDB flat in a prime location now costs ~S$500,000–S$600,000, while a 2-bedroom condo in the OCR starts at S$800,000–S$1.2 million—a manageable jump for Singaporeans.
• Rental Yield Advantage: OCR/RCR rentals offer 4–6% yields, higher than HDB rentals, making them attractive for buy-to-let investors.

Sustained Secondary Sales and Low Inventory: A Balanced Market

OCR/RCR's resilience is underpinned by strong secondary sales and controlled inventory:

• Secondary Transactions: OCR secondary sales rose 3.4% QoQ in Q3 2024, driven by mega projects like The Botany at Dairy Farm and Treasure at Tampines. RCR sales grew 0.8% QoQ, with well-located projects like The Hill @One-North maintaining demand.
• Inventory Levels: Vacancy rates in RCR (6.6%) and OCR (4.7%) remain below historical averages, signaling robust absorption. The OCR's 4.7% vacancy rate is a stark contrast to the CCR's 10.3%, highlighting oversupply concerns in luxury segments.

Macroeconomic Tailwinds: Interest Rate Cuts and Resilient Households

Two factors will amplify OCR/RCR's recovery in 2025:

1. Interest Rate Cuts: Singapore's SORA (Singapore Overnight Rate Average), which underpins mortgages, has fallen to 3.2% (3M) from 4.5% in late 2022. Further declines are likely as U.S. rates ease. This will reduce monthly mortgage payments by ~15–20% for floating-rate borrowers, boosting affordability.
2. Strong Household Balance Sheets: Singaporeans' median household income rose 3.7% YoY in 2023, while unemployment remains low (2.6% in Q3 2024). This resilience supports demand even amid global uncertainties.

Strategic Investment Play: Target Non-Landed OCR/RCR Properties

Investors should prioritize non-landed properties in OCR and RCR for the following reasons:

• Growth Potential: OCR/RCR prices are projected to rise 3–5% in 2025, outperforming the CCR's expected 1–2% gains.
• Location-Specific Picks:
• OCR: Focus on areas near MRT stations and infrastructure hubs, such as The Myst (Tampines) and The Botany at Dairy Farm.
• RCR: Target projects like Jadescape (Novena) and The Hillshore (One-North), which blend proximity to amenities with affordability.
• Timing: Act now before prices rebound. Current valuations are 20–25% below pre-pandemic peaks relative to income, offering a margin of safety.

Risks and Considerations

• Foreign Policy Shifts: A sudden easing of ABSD rules could reignite CCR demand, diverting buyers from OCR/RCR.
• Supply Pipeline: Over 32,500 units (including ECs) are slated for completion by 2027. Monitor supply growth to avoid oversaturation in specific submarkets.

Conclusion: The Case for OCR/RCR Now

The Singapore residential market's recovery hinges on OCR and RCR. Their undervalued pricing, sustained secondary sales, and alignment with domestic demand make them the best risk-reward plays for 2025. With interest rates poised to fall and HDB buyers primed to upgrade, investors who act now can secure positions in a market primed to rebound.

The time to position for Singapore's next housing cycle is now.