The real estate market in Singapore could experience varying outcomes in the next 12 months due to the uncertain macroeconomic outlook, according to CBRE’s Singapore Market Outlook 2025 report released on January 23.
The easing of inflation and interest rates may provide some relief to the property market in 2025. However, Moray Armstrong, managing director of advisory services at CBRE, expresses concern that expectations of slower economic growth in 2025 could have a negative impact on property demand.
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The Ministry of Trade and Industry is projecting Singapore’s GDP growth to be between 1% and 3% in 2025, a decrease from the 4% growth recorded in 2024 according to advance estimates released in January.
Several other factors, including ongoing geopolitical tensions, the new US administration with a nationalistic economic agenda, and the release of the URA Master Plan 2025 in the middle of the year, could potentially impact the market in the near term, according to Armstrong. However, he believes that despite these mixed signals, opportunities still exist for real estate market participants who can capitalize on emerging trends.
CBRE’s head of research for Singapore and Southeast Asia, Tricia Song, shares a similar sentiment that the overall property market is supported by limited new supply and stable demand levels. She predicts that despite the unknowns, the Singapore real estate market will continue to demonstrate stability and resilience, making it attractive to global investors.
New launches expected to sustain private residential sales momentum
According to URA data, developer sales volume tripled to 3,511 units last quarter, rebounding from record lows in the first nine months of 2024. Prices increased by 2.3% quarter-on-quarter, marking the highest quarterly growth in 2024.
While this rebound has sparked speculations of possible cooling measures, CBRE believes it is unlikely at this point in time. The firm states that unless prices rise significantly in the coming quarters, they do not see this happening.
In light of improved buyer sentiment, developers are likely to continue launching new projects. CBRE estimates that between 12,000 to 14,000 new units could be launched this year, almost double the 6,647 units launched in 2024. As a result, CBRE projects that between 7,000 to 8,000 new homes could be sold in 2025, an increase from the 6,469 units sold in 2024.
This higher volume is expected to support price growth ranging from 3% to 6% in 2025, building upon the 3.9% increase recorded in 2024. Additionally, CBRE predicts that rental rates will grow between 1% and 3% this year.
Limited supply expected to support prime office and retail rents
The office market experienced muted growth in 2024, with global economic uncertainties, elevated fit-out costs, and hybrid work arrangements slowing leasing volumes. Core CBD (Grade A) rents grew by just 0.4% year-on-year last year, a decrease from the 1.7% rental growth recorded in 2023.
With economic growth predicted to slow in 2025, CBRE projects that office leasing momentum will remain muted as uncertainties dampen expansionary demand.
On the other hand, a limited pipeline of new Core CBD (Grade A) offices over the next three years is expected to keep vacancy rates low. Only 0.58 million sq ft of new office space is due to be completed annually between 2025 and 2027, significantly less than the 10-year average of 1.28 million sq ft per annum.
As a result, CBRE predicts that the limited medium-term supply and the continued focus on quality by occupiers will support a 2% growth in Core CBD (Grade A) rental rates in 2025, in line with GDP projections.
Limited supply is also expected to support retail rents. The expected supply of new retail space in 2025 is predicted to drop to 0.5 million sq ft, 40.4% lower than in 2024, and below the 10-year historical average of 0.91 million sq ft per annum.
CBRE adds that leasing sentiment for retail property remains positive, thanks to inbound tourism and a robust pipeline of entertainment and other events. Thus, the firm projects that average retail prime rents will grow by 2% to 3% in 2025, recovering to pre-pandemic levels.
Prime logistics rents to remain steady, investment sales momentum to continue
According to CBRE, expansion demand by occupiers in the industrial sector was subdued in 2024 due to cost pressures and disruptions in the supply chain caused by the Red Sea crisis. As a result, rents for prime logistics properties have been consolidating, rising by just 1.1% to $1.87 psf per month in 2024.
Despite a bumper supply of almost 5 million sq ft of warehouse space expected to be completed this year, CBRE believes at least 60% of the new prime logistics space has been pre-committed. Therefore, the firm predicts that prime logistics rents will stay relatively stable in 2025.
In the capital markets, CBRE believes that real estate investment volumes in Singapore will continue to grow in 2025, although at a slower pace. In 2024, real estate investment volumes saw a 28% year-on-year increase to $28.62 billion, recovering from the 30.3% year-on-year decline in the previous year.
According to CBRE, this was due to interest rate cuts that boosted investor sentiment and appetite, which is expected to persist in 2025. According to the firm’s latest Asia Pacific Investor Intentions Survey, the majority of investors who transacted in Singapore real estate expect to purchase the same or more volume in 2025 compared to 2024.
However, given ongoing economic and geopolitical uncertainties, CBRE anticipates that investors will be selective in the short term and choose to allocate capital into specific sectors or strategies with a more favorable outlook. They predict a 10% year-on-year growth in investment volumes in 2025, barring any major macroeconomic shocks.
CBRE’s survey also found that the industrial and logistics sector remained the most preferred among investors, followed by residential assets and office properties.