Higher development costs squeeze property developer margins to 8–15%

Developers are expected to prioritise sales volumes over aggressive pricing.

Singapore property developers are facing tighter profit margins in 2026 amidst rising construction and marketing costs, according to RHB.

Margins are expected to hover between 8–15%, even as the private residential market remains resilient.

Despite margin pressure, the residential market is expected to maintain momentum, with private home prices forecast to rise 2–4% in 2026 following a 3.4% increase in 2025. This growth is supported by healthy GDP and wage expansion, slightly lower interest rates, and lingering pent-up demand.

According to Knight Frank, the city-state’s residential market showed resilience in 2025, with first-quarter sales reaching their highest level since 2021. Total investment sales in the residential segment totaled around S$14.6 b, contributing to a record S$40 b across all real estate transactions.

Developers are expected to prioritise sales volumes over aggressive pricing, balancing the need to reduce inventory with the cost pressures from land and construction, RHB said.

About 9,000–10,000 new homes are expected to be sold next year, a slight decline of 10–20% from 2025, which saw an estimated 10,951 units sold, excluding executive condominiums.

The high 2025 base was fuelled by a sharp fall in interest rates and a robust labour market, releasing pent-up demand.

Resale volumes, however, are projected to remain largely flat as buyers continue gravitating toward new launches offering better price appreciation and lower initial interest costs.

Singapore’s population grew 1.2% in 2025 to 6.11 million, with both resident and foreigner populations rising. Smaller household sizes — down from 3.7 in 2000 to 3.09 in 2024 — have structurally boosted housing demand, along with high home ownership rates of c.91%.

Pent-up demand remains as average annual developer sales over the past four years (excluding ECs) were 16% below the 10-year average. The 2025 rebound reflected falling interest rates, strong economic growth, and booming equity markets.

Analysts expect this trend to continue in 2026, with demand broadening from mass-market to mid-tier and high-end segments.

GDP growth is projected at 3% in 2026, down from 4.8% in 2025, supported by resilient external demand, improving trade conditions, global monetary easing, and domestic policy measures.

Local buyers dominate, making up 99% of non-landed private home transactions, whilst foreign purchases remain below 100 units per quarter following the 2023 doubling of ABSD to 60%.

HDB upgraders also drive demand, with resale prices up 2.9% in 2025 and a record 1,500 flats selling above $1m.

Unsold inventory remains below the 10-year average, with 17,019 units as of 3Q25, supporting prices. Inventory is highest in the high-end segment (38%), followed by mid-tier (33%) and mass market (29%).

For 1H26, government land supply (GLS) remains stable at 9,185 units, split evenly between the confirmed and reserved lists. 

Approximately 12,000 units from 24 projects are in the 2026 launch pipeline, including five ECs.

Excluding ECs, around 9,640 units will be launched, 16% lower than 2025. Mass-market projects account for about 70% of supply, with strong expected take-up rates in the Outside Central Region and Rest of Central Region.

Key developments include Pinery Residences, Chuan Grove, Upper Thomson Road (former Thomson View), and Holland Link GLS sites.

Meanwhile, residential rents are projected to rise 3–5% in 2026 amidst low vacancy rates, limited completions (7,878 units) and rising demand from expatriates.

Analysts noted that the co-living sector may benefit from limited rental supply.

As of December 2025, investment sales in Singapore totalled approximately $24b, led by the residential sector, which contributed $10.82b, or 45% of the overall sales, PropNex Research showed.

RHB analysts said key risks remain further property cooling measures, such as higher ABSD or tighter loan limits, though the likelihood of major intervention is seen as low given moderating price growth and demand led mainly by local owner-occupiers.