CBRE’s Singapore Market Outlook 2025 report, released on January 23, suggests that the real estate market may see divergent outcomes in the next 12 months due to an uncertain macroeconomic outlook. While inflation and interest rates are expected to ease, leading to some relief for the property market, the slowing economic growth projected for 2025 could dampen demand for properties, according to Moray Armstrong, managing director and advisory services at CBRE.
The Ministry of Trade and Industry has forecasted a GDP growth of 1% to 3% for Singapore in 2025, a decrease from the 4% growth recorded in 2024. Armstrong notes that there are other factors that could potentially impact the market in the short term, such as geopolitical tensions, a new US administration with a nationalistic economic agenda, and the release of the URA Master Plan 2025 in mid-year. However, despite these uncertainties, opportunities still exist in the real estate market for those who can capitalize on emerging trends.
CBRE’s head of research for Singapore and Southeast Asia, Tricia Song, shares this optimistic sentiment, stating that the property market continues to be bolstered by limited new supply and stable levels of demand. She predicts that the Singapore real estate market will continue to offer stability and resilience, making it appealing to investors from around the world.
According to URA data, developer sales volume tripled to 3,511 units in the last quarter, rebounding from record lows in the first nine months of 2024. Prices also increased by 2.3% quarter-on-quarter, the highest growth in 2024. While some may speculate that this rebound could lead to cooling measures being implemented, CBRE believes this is unlikely at present unless prices rise sharply in the coming quarters.
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With improved buying sentiment, developers are expected to continue launching new projects. It is estimated that 12,000 to 14,000 new units will be launched this year, almost double the 6,647 units launched in 2024. As a result, CBRE predicts that between 7,000 to 8,000 new homes could be sold in 2025, up from 6,469 units in 2024. The increased volume is expected to support a price growth ranging from 3% to 6%, extending the 3.9% growth seen in 2024. At the same time, CBRE anticipates rental rates to grow between 1% and 3% this year.
Limited supply is also projected to support prime office and retail rents. The office market saw a quieter 2024, with limited new supply, elevated fit-out costs, and hybrid work arrangements affecting leasing volumes. Core CBD (Grade A) rents increased by only 0.4% year-on-year, a decrease from the 1.7% growth in 2023. As economic growth is expected to slow in 2025, office leasing momentum is predicted to remain muted due to uncertain 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 expected to be completed annually between 2025 and 2027, less than half of the 10-year annual average of 1.28 million sq ft. Therefore, CBRE projects that limited medium-term supply and a continued preference for quality spaces will support Core CBD (Grade A) rental growth of around 2% in 2025, in line with GDP projections.
Limited supply is also expected to boost rents in the retail property market, with only 0.5 million sq ft of new retail space estimated to be completed in 2025. This is a 40.4% decrease from the 2024 levels and is also lower than the 10-year historical average of 0.91 million sq ft. CBRE adds that leasing sentiment for retail properties remains positive, supported by inbound tourism and a robust pipeline of entertainment and other events. Therefore, CBRE projects that average retail prime rents will grow by 2% to 3% in 2025, recovering to pre-pandemic levels.
In the industrial sector, CBRE believes that expansion demand by occupiers was subdued in 2024 due to cost pressures and supply chain disruptions caused by the Red Sea crisis. As a result, rents for prime logistics properties increased by only 1.1% to $1.87 psf per month in 2024. However, a bumper supply of almost 5 million sq ft of warehouse space is expected to be completed this year. At least 60% of this new prime logistics space has already been pre-committed, which should relieve some downward pressure on occupancy rates. Therefore, CBRE predicts that prime logistics rents will remain relatively flat in 2025.
In the capital markets, CBRE believes that real estate investment volume in Singapore will continue to grow in 2025, but at a slower pace. In 2024, investment volumes saw a 28% year-on-year increase to $28.62 billion, a reversal from the previous year’s 30.3% decline. This was due to interest rate cuts that boosted investor sentiment and appetite, which is expected to persist in 2025. According to CBRE’s Asia Pacific Investor Intentions Survey, the majority of investors expect to purchase the same or more volume of Singapore real estate in 2025 compared to 2024.
However, given ongoing economic and geopolitical uncertainties, CBRE anticipates investors to be selective in the near term, preferring to allocate capital into specific sectors or strategies with a more favourable outlook. CBRE predicts a 10% year-on-year growth in investment volumes 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.