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How High Can Property Prices Go In 2023? Here’s What Might Happen

profileHui Juan Neo

“Do you have a house already? It’s so expensive now, can you afford a 4-room near your parents?”

These are questions I’m expecting relatives to ask this Chinese New Year.

Source: Giphy

As harmless as it seems, it’s a question a lot of people are asking themselves too.

It’s no doubt that one of 2022’s highlights was the unrelenting rise in property prices.

We witnessed how the interest rates affected our bank loans, fixed deposits, and savings accounts are affected.

Even with new HDB projects coming up this year to meet the demand for new houses, these launches also hit a new high in price.

Just in Aug 2022, five-room flats or larger at Central Weave @ AMK started at more than $700,000 and some topped at $842,000.

The concern remains – can you afford an HDB flat this year?

Here’s what you need to know!

TL;DR: Singapore Property Prices in 2023

Click here to jump:

Singapore Property Price Trend: Last 10 Years

Property prices have not always been this high before, but they shot up during COVID due to pent-up demand, which pushed up prices of resale flats.

There are speculations on whether prices will start going down because there could be a recession, and typically, property prices tend to tank when there is one (1996 & 2008 specifically).

To see this we will need to look at the Private Residential Property Price Index provided by the Urban Redevelopment Authority (URA), which tracks the overall price movement of the private residential market.

Source: URA | Private Residential Property Price Index

Note: This index is based on the price indices of private properties, offices, shops, multiple-user factories, and warehouses.

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Singapore Property Cooling Measures

Singapore has seen HDB resale prices rise for 10 consecutive quarters, with the Government implementing cooling measures to try and moderate demand.

These were the years when cooling measures were put in place:

  • 15 May 1996: Taxing gains from property sales
  • 14 Sep 2009: Two schemes that (1) allowed buyers to only make a 20% downpayment and defer further payments, and (2) require buyers to only repay the principal housing loan after a specified period that’s usually when the unit is completed, were scrapped
  • 20 Feb 2010: Loan-to-Value (LTV) limit was lowered from 90% to 80% and Seller’s stamp duty reinstated
  • 30 Aug 2010: Minimum cash downpayment raised to 10% and LTV lowered to 70% and Seller’s stamp duty period expanded from one to three years
  • 14 Jan 2011: Changes to Seller’s stamp duty and LTV limits
  • 8 Dec 2011: Introduction of Additional Buyer’s Stamp Duty (ABSD)
  • 6 Oct 2012: LTV ratios were reduced for loans exceeding 30-year tenures and a new limit of 35 years was applicable to loans for all residential property
  • 12 Jan 2012: ABSD raised and LTV tightened
  • 29 Jun 2013: Total Debt Servicing Ratio (TDSR) was introduced to limit how much an individual can borrow to buy property
  • 6 Jul 2018: ABSD raised and LTV tightened
  • 16 Dec 2021: The floor rates in calculating the Total Debt Servicing Ratio (TDSR) tightened from 60% to 55%, and the LTV ratio was tightened from 90% to 85%
  • 30 Sep 2022: 15-month wait-out period for private property owners and ex-private property owners on buying non-subsidised HDB resale flats, curbing the demand where.

If you look at the HDB Resale Price Index, prices did crash after the Asian financial crisis in 1997 and rebounded during the global financial crisis of 2008.

Source: URA | HDB Residential Property Price Index

Note: The index tracks the overall price movement of the public residential market and is based on the quarterly average resale price by the date of registration) of HDB resale prices.

When we look closely, over the last 20 years (with the exception of 2009 – 2012), when a cooling measure was put in place, prices started dipping after 6 to 12 months.

And indeed, according to PropertyGuru, HDB resale prices did rise slower at 8.4% and 10.3% year-on-year in Q4 2022.

Before the cooling measures were put in place in Sep 2022, private property owners could weigh on the resale supply if they want to ‘right sized’ their homes by choosing a larger HDB resale, or a smaller private unit.

Pent-up Demand & Undersupply of Private Properties

While property prices remain sky-high across all markets, there’s still demand for private properties due to pent-up demand and a lack of available projects on the market.

Source: URA | URA Property Price Index Q4 2022

According to the URA Property Price Index, prices of private residential properties appreciated for 10 consecutive quarters, increasing by 3.8% quarter-on-quarter in the third quarter, and 13.6% year-on-year.

According to URA, there were around 15,677 uncompleted private residential units that had not yet been sold, a rise of nearly 10.7% from the low in Q4 2021. However, it remained 8.5% lower than in Q3 2021.

On the supply side, developers face a 35 per cent Additional Buy Stamp Duty (ABSD), and are subject to an additional non-remittable five per cent, regardless of the size of the project. This incentivises developers to build smaller instead of mega-projects, and can sometimes be marketed as exclusive or part of an integrated project.

Given these reasons, supply could be tightened.

Economics tells us that with low supply and high demand, prices might not necessarily drop.

The important questions to ask will be:

  • When the 15-month wait-out period is over, would there be a spillover effect on resale supply and price again?
  • Even though sales volume slowed down in Q4 2022, would demand drop in 2023?

How to tell if there’s going to be demand? The first telltale sign is to look at the number of BTO applications.

BTO Supply16,80017,10923,000
BTO Applications received87,80023,077117,251 (including Community Care Apartments)

Noticed that the number of applications is way higher than the supply yet?

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Will Property Prices Drop in 2023?

There’s no guarantee about what might happen this year.

However, based on what might be holding up prices, it is likely that prices would remain at their current level at least for the first six months of 2023, or there could be a slowdown in price increments. Home prices might not correct downwards unless there’s a recession.

Read more:

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Affordable Housing For All Singaporeans

Previously, we shed light on how HDB determined the prices of BTO flats.

We’ve heard opposing arguments on the affordability of public housing in Singapore.

Despite what many seem to claim, BTOs are still affordable for the average Singaporean whereas resale flats are still affordable but may soon be out of reach should the resale market continue ballooning.

But the real question is: What exactly is “affordable”?

Both Millennials and Gen Z first jobbers are enduring many things at once – inflationary pressures, high housing interest rates, and borrowing costs.

Source: Giphy

But we need to remember that beyond economics, housing issues conflate a number of different political and social issues.

Without going too much into politics, let’s talk about social issues first.

Ask around and you’ll notice defining affordability is very difficult.

For some, it could mean being able to “upgrade” at some point.

And for others, it could mean they have a place comfortable to stay and they don’t experience financial difficulties paying their mortgage.

Aside from these factors, we haven’t talked about the number of dependents, if the household is dual or single income, and if you’re comfortable spending 30% of household income on a mortgage.

Resale Flats Being The Best Recourse For Most People

Source: Giphy

Waiting time is too long and there’s an urgent need for housing?

While Open Booking and Sales of Balance flats are options, you need 100% luck to be able to secure one that you like.

What’s the next best choice?

Resale flats.

For those who want to downgrade from a bigger condo to a smaller and more affordable flat?

Resale flats.

And for Permanent Residents who need to wait three years before they can buy a flat?

Resale flats.

We have to see for once that not everyone can apply for BTOs and have to subject themselves to (high) Cash-Over-Valuation.

Public Housing Being Treated as Commodities

Source: Investment Stab

When it comes to public housing, many Singaporeans are also trying to “flip” BTOs instead of treating their homes as a place to live for the long term.

Once the 5-year Minimum Occupancy Period is up, they will sell their flat and apply again for another BTO.

Although there are no official statistics to prove this, I personally believe so when I look at the oversubscription rates for second-timers during BTO applications.

Let’s not forget that million-dollar HDB flats are a thing because people decide to downgrade when they are older.

Supply for BTO Flats in Singapore

Due to the strong demand for public housing in recent years, HDB has been ramping up the production of BTO projects.

But therein lies a problem, in the name itself; “Build-To-Order”.

Source: Giphy

Yup, HDB flats are only built once there is sufficient demand.

This was a great idea when there was an oversupply of HDB flats in the 90s, but what happens when there is too much demand?

We are now playing a game of catch-up.

When it comes to supply, time is an integral factor. Along with BTO delays and the slowdown of supply chains, HDB BTO flat supplies are not keeping up with the current demand for housing.

Should we relook at the whole BTO system?

Read more:

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We are living in difficult times.

Would you be shifting your sights to the rental market because of affordability constraints?

Needless to say, for some people, buying a house seems like a faraway dream when renting is already a struggle.

Have more to share on this topic? Share your thoughts on Seedly!


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About Hui Juan Neo
Personal finance is almost everything in life and it starts from the smallest details. I'm a maven-connector and I enjoy sharing life and saving hacks!
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