CBRE’s Singapore Market Outlook 2025 report, released on January 23rd, predicts divergent outcomes for the real estate market in the next 12 months due to an uncertain macroeconomic outlook.
On one hand, the easing inflation and interest rates are expected to provide some relief for the property market in 2025. However, Moray Armstrong, CBRE’s managing director and advisory services, warns that slowing economic growth may negatively impact property demand.
The Ministry of Trade and Industry projects Singapore’s GDP to grow between 1% and 3% in 2025, down from the 4% growth seen in 2024. Armstrong believes that other factors such as ongoing geopolitical tensions, a new US administration with a nationalistic economic agenda, and the release of the URA Master Plan 2025 in mid-year may also impact the market.
Despite these uncertainties, opportunities still exist in the real estate market for those who can capitalize on emerging trends, according to Armstrong.
Tricia Song, CBRE’s head of research for Singapore and Southeast Asia, also remains optimistic, stating that the limited new supply and stable demand will continue to bolster the property market. She predicts that the Singapore real estate market will maintain its stability and resilience, making it an attractive option for global investors.
Developer sales volume saw a threefold increase in the last quarter of 2024, bouncing back from record lows in the first nine months of the year, according to URA data. Prices also rose by 2.3% quarter-on-quarter, the highest quarterly growth in 2024. While some speculate that this may result in cooling measures, CBRE believes that such measures are unlikely unless there is a sharp increase in prices in the coming months.
With improved buying sentiment, developers are expected to launch more projects, with an estimated 12,000 to 14,000 new units potentially hitting the market this year. This is nearly double the 6,647 units launched in 2024. As a result, CBRE projects sales of between 7,000 to 8,000 new homes in 2025, a significant increase from the 6,469 units sold in 2024. This is expected to support price growth ranging between 3% to 6%, on top of the 3.9% growth seen in 2024. CBRE also predicts rental rates to grow between 1% to 3% in 2025.
The office market saw a muted 2024, with global economic uncertainties, high fit-out costs, and hybrid work arrangements affecting leasing volumes. Core CBD (Grade A) rents only grew by 0.4% year-on-year, a significant slowdown from the 1.7% growth in 2023.
With economic growth expected to slow in 2025, office leasing is expected to remain subdued as uncertainties temper demand. However, the limited pipeline of new Core CBD (Grade A) offices over the next three years is predicted to keep vacancy rates low. Only about 0.58 million square feet of new office space is expected to be completed annually from 2025 to 2027, less than half of the 10-year average of 1.28 million square feet. As a result, CBRE predicts rental growth of about 2% in 2025, in line with GDP projections.
Investing in real estate is a strategic move, and in Singapore, location plays a vital role in its success. For instance, condominiums situated in central areas or in close proximity to essential amenities like schools, shopping malls, and public transportation hubs have a higher chance of appreciating in value. This trend is evident in prime locations such as Orchard Road, Marina Bay, and the Central Business District (CBD), where property values have consistently shown growth. Families also prioritize condos in these areas due to their close proximity to reputable schools and educational institutions, making them an even more appealing investment option. Singapore Projects are an excellent addition to any real estate portfolio, particularly in these sought-after locations.
Limited supply is also expected to support rents in the retail market. The supply of new retail space is forecasted to drop to 0.5 million square feet in 2025, a 40.4% decrease from 2024 and lower than the 10-year average of 0.91 million square feet. CBRE notes that leasing sentiment in the retail sector remains positive, thanks to inbound tourism and a robust pipeline of entertainment and other events. As a result, CBRE predicts average retail prime rents to grow by 2% to 3% in 2025, recovering to pre-pandemic levels.
Prime logistics rents are also predicted to remain flat, with demand for industrial properties being subdued in 2024 due to cost pressures and supply chain disruptions. While a bumper supply of almost 5 million square feet of warehouse space is expected to be completed in 2025, CBRE notes that at least 60% has been pre-committed, which should prevent downward pressure on occupancy rates. Therefore, prime logistics rents are expected to remain relatively flat in 2025.
CBRE believes that real estate investment volume in Singapore will continue to grow in 2025, albeit at a slower pace. In 2024, investment volume saw a 28% increase year-on-year to $28.62 billion, reversing the 30.3% decline in the previous year. This was driven by interest rate cuts that boosted investor sentiment and appetite, which is expected to continue into 2025.
According to CBRE’s latest Asia Pacific Investor Intentions Survey, most investors transacting in Singapore real estate expect to purchase the same volume or more in 2025 compared to 2024. However, given the ongoing economic and geopolitical uncertainties, investors are likely to be more selective in the near term, focusing on specific sectors or strategies with a more promising outlook. CBRE predicts a 10% year-on-year growth in investment volume in 2025, barring any major macroeconomic shocks.
The survey also found that the industrial and logistics sector remained the most preferred among investors, followed by residential assets and office properties.…