The High Costs Of Selling A Property In Singapore: Here’s What’s Happening On The Ground

So with property prices being so high of late, agents must be in a great spot, right? While we still have the occasional agent flashing the goods on social media (remember, this is mainly to preen their feathers to build their team), things aren’t so rosy on the ground.

In fact, it’s quite the opposite – more agents are seemingly in a tougher spot this year, with some seeing incomes fall by 30 to 50 per cent. And one of the reasons is just having nothing much to sell. Outside of marketing new launches, word on the ground is that Singaporeans are reluctant to part with their properties; and this may be a sign of coming changes:

The biggest headache of 2023/4 may be replacement property costs

Among all the agents we spoke to, the majority brought up “replacement costs” as the biggest bugbear of 2023, and likely the coming year as well. Replacement costs refer, quite simply, to the cost of the next property you purchase to replace the one you’re selling. 

But in the post-Covid period, prices have skyrocketed. New launch condos currently average over $2,100 psf, even in fringe regions; and even resale condos have remained stubbornly high; on a year-on-year basis from 2022, we can see prices briefly dip, and then surge back to the $1,500+ psf mark. 

If we consider 1,100 sq. ft. (about the size of a 4-room flat) to be a typical family-sized condo unit, this is a quantum of around $2.3 million for a new launch, and $1.65 million for a resale unit.

According to realtors, this is the typical “sell high, buy high” scenario that upgraders fear. One realtor, who transacted a million-dollar flat in the past year, told us the following:

“The seller almost chose to back out. They felt that even if they could transact at over $1 million, nothing that met their expectations was affordable. They even settled for a resale condo, instead of one of the new condos that was their first choice. 

In almost seven years I have never seen the market like this, where prices are so high you can sell your flat for $1 million plus, and still cannot get the condo you want.”

Another realtor opined that the same issue could also affect right-sizing:

“I had one seller, an older couple, who were considering to downgrade from a 5-room to a 3-room flat. But they wanted to stay within their neighbourhood, because they look after their grandchildren nearby. But they changed their mind when they saw the resale flat prices, which were between $430,000 to $450,000 for a 3-room in Clementi. Even though they could buy, the husband felt it was not worth it to move.”

Couple this with the current high-interest rate environment (see here how interest rates can affect you), and you can understand the current wait-and-see status for most buyers.

A high number of projects are reaching TOP, but no immediate relief 

More projects are reaching completion this year and the next; yet it seems that some developers have begun resorting to Deferred Payment Schemes (DPS) again. DPS is often, but not always, a sign that a developer is struggling to move its last few units. 

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DPS allows buyers to put down a 20 per cent payment, and only pay the remainder after 24 months. But DPS is only available for completed units, and hence only applies in the latest sales phases. 

In addition, we’re hearing more realtors complain of fewer inquiries, with regard to new launch projects. This is a turnaround from the past few years, when the market was characterised by undersupply. 

We first saw signs of this in August, when market analysts and realtors were willing to chalk up a 72 per cent dip in transactions to the Seventh Month. But that excuse is now over, and the crowds have been selective over projects that they are visiting.

The reason given is, again, the quantum. Even back in 2021, realtors had warned that HDB upgraders – who make up the bulk of buyers – are most comfortable in a price range of $1.6 million to $1.8 million. There was already concern over the rising new launch prices at that point. Today, with new launch three-bedders often reaching $2 million, a large part of the market may be priced out; even with HDB resale prices at record highs. 

It’s not that developers are unaware of this; but a combination of high Land Betterment Charges, ABSD rates, land prices, changes to GFA calculations, and high commissions* have prevented prices from falling. As an example of this, consider the Marina View land parcel which drew only a single bid: in earlier years, we’d have seen developers compete more for such a location.

In short, developers have little room left to give discounts. But unless prices can come down, homeowners aren’t selling their current property to buy new condo units; it’s just not affordable to them. 

*Commissions paid to property agents for new launches are often higher than the usual two per cent for resale units. Commissions charged to developers can sometimes range up to five per cent or more, which is also blamed for higher costs.

“Nothing available to sell” even for en-bloc 

We had expected to see another round of en-bloc sales this year or the last. This is on the back of the usual five-year cycle (i.e., developers have a five-year time limit to complete and sell all projects, so there’s usually a rush for land every five years, with the last en-bloc peak being in 2017).

But realtors noted that the en-bloc scene has been subdued, with an ongoing deadlock between buyers and sellers. Almost every realtor concurred on the main cause: ABSD rates, and their effect on replacement properties. 

Consider that, if you own a second property – such as a shoebox unit for rental – selling it might mean permanently giving up your rental income. This is because, for many, it’s not viable to pay 20 per cent ABSD for a replacement property. It’s unlikely that your sale proceeds will cover both the cost of a new property, and the stamp duty you paid. 

This is causing many owners to actively resist en-bloc attempts; at least until they get sufficient sale proceeds to pay for a replacement. Among some small demographics, such as foreigners, resistance is even fiercer, as a replacement property for a foreigner includes 60 per cent ABSD.

Likewise, the high asking prices for some of these older properties mean that the numbers just don’t make sense for developers to still have an adequate margin to redevelop and sell. That and the combination of more Government Land Sales (GLS) land released, which developers generally prefer anyway.

As such, the expected tide of en-bloc sales has yet to manifest. 

“Nothing to sell, and everything costs too much to buy”

This was the depressed opinion of one realtor, in summing up the situation from her perspective. If you’ve been receiving a lot of calls and flyers to sell your house lately, well, this may be the reason. 

It could very well be that the surge in volume over the last few years means that most people would have already sold and bought their replacement home. The combination of higher prices today and high interest rates would probably deter those on the fence about doing so at this current point.

However, the deadlock probably won’t last beyond the near term. Most agents expect that, with the slew of completed projects coming up, prices have to dip or at least flatten out; and when that happens, the upgraders may be back in the market (which also means they’ll start selling as well since few people are happy to pay 20 per cent ABSD!)

Either way, it’ll be interesting to see if more investors/buyers would really start coming into the market as the supply from these completed projects ramp up.

For more on-the-ground updates on the Singapore property market, follow us on Stacked. We’re keeping an eye on the situation, and will update you as soon as we get word.