Property Players Turn Pessimistic on Suburban Residential in 2Q2026 on Affordability Concerns

Industry sentiment in Singapore’s real estate market rebounded in the second quarter of 2026, supported by stronger-than-expected economic growth in the first half of the year, according to the quarterly Real Estate Sentiment Index released on Thursday 24 September by the National University of Singapore’s Institute of Real Estate and Urban Studies.

The Composite Sentiment Index rose to 5.6 in 2Q2026, from 4.9 in the preceding quarter. The Current Sentiment Index, which tracks sentiment over the past six months, similarly increased to 5.6 from 4.9, while the Future Sentiment Index, which tracks the next six months, climbed to 5.5 from a neutral 5.0 in the first quarter.

The net balance figures used throughout represent the difference between the proportion of respondents with positive and negative sentiment.

The rebound followed a slight dip in sentiment in 1Q2026 amid heightened geopolitical tensions over the conflict in the Middle East. Much of the previously optimistic sentiment in Singapore was overtaken by “an anticipation of dire exogenous risks”, Professor Qian Wenlan, director of Ireus, said then.

Qian attributed the improvement to a more sanguine economic outlook propped up by a better-than-expected performance in the first half of this year. The economy expanded by 6.1 per cent year on year. In the second quarter alone, gross domestic product grew 5.9 per cent, just a tad lower than the 6.3 per cent increase in the first quarter. The government in August also upgraded its 2026 economic growth forecast to a range of 4.5 to 5.5 per cent, up from 2 to 4 per cent previously, amid a global boom driven by artificial intelligence investments.

The office sector in particular saw its current net balance jump to 36 per cent, its highest in several years, with a future net balance of 27 per cent. A survey respondent cited the market’s limited pipeline supply and stronger economic outlook.

Other commercial sectors that fared well include business parks and hi-tech space, hotel and serviced apartments, and industrial and logistics properties. The current net balance for business parks and hi-tech space rose to 5 per cent, from negative 25 per cent in 1Q2026, while industrial and logistics properties improved to positive 9 per cent, from negative 5 per cent.

Retail remained subdued. Prime retail recorded a current net balance of negative 23 per cent, while suburban retail stood at negative 18 per cent.

Industry sentiment on suburban residential reversed sharply in the second quarter, with its current net balance falling from 15 per cent previously to negative 14 per cent. This is its first negative figure in more than a year, Qian noted. The future net balance stood at negative 5 per cent.

Qian said the divergence between the prime and suburban residential markets reflects a combination of “demand resistance, supply pressures and policy dynamics”.

Mass-market suburban homes are predominantly driven by local owner-occupiers and Housing and Development Board upgraders. But affordability has become a “more onerous constraint” as new launch prices reach new highs amid tight supply, she noted.

The higher monthly income ceilings for Build-To-Order flats and executive condominiums also widen the pool of government-subsidised options, which may moderate urgency in the suburban private market.

Further, Qian reckoned that the government’s removal of the 15-month wait-out period for private homeowners looking to buy public homes could lead to a surge in private resale listings. This would expand the supply of suburban homes as owners rush to meet the mandatory six-month disposal window.

In contrast, the prime residential sector saw more optimism, with current net balance inching up to 9 per cent, though its future net balance was negative 14 per cent.

“In contrast, prime residential has held up, supported by a distinct buyer demographic and a clear flight to safety,” explained Qian. “While the mass market grapples with affordability challenges, prime and luxury sales are anchored by well-capitalised buyers who are seeking a good asset class as investment and reliable store of wealth.”

Among developers surveyed, 70 per cent expect the number of new residential launches over the next six months to remain broadly unchanged, up from 60 per cent in the previous quarter. Another 20 per cent expect a moderately higher number of launches, while 10 per cent anticipate a moderately lower number. Half expect prices at new residential launches to remain unchanged, while 30 per cent expect moderately higher prices and 20 per cent anticipate moderately lower prices.

Even with the generally brighter outlook, 81.8 per cent of survey respondents flagged a slowing global economy as one of the top risks facing the market over the next six months, up from 75 per cent in the previous quarter. Mounting inflationary pressures and borrowing costs were also top of mind, cited by 81.8 per cent in the second quarter, up from 80 per cent in the first.

Other risks included job losses, identified by 59.1 per cent of respondents, increased supply of new development land at 22.7 per cent, and excessive supply of new property launches at 18.2 per cent, up from 5 per cent in 1Q2026. EdgeProp additionally reported rising construction costs cited by 45.5 per cent, and noted that concerns over further government demand-side cooling measures fell sharply to 13.6 per cent, from 40 per cent in the previous quarter.

On development costs, some 90 per cent expressed concern over building material costs, while 80 per cent cited financing and labour costs, and 70 per cent were concerned about land costs.