How Is Covid19 Impacting Singapore Property Market

Singapore property market saw a strong momentum in the beginning of 2020. However the unforgiving Covid19 has thrown it into a halt, exacerbating the already uncertain economy.

Yet we are beginning to see transaction momentum gaining traction after the Circuit Breaker. So exactly what are the numbers showing?

Today we are going to examine the data to see what the market is telling us and what to expect.

How Is Singapore Property Market Responding

Singapore Property Market Before Circuit Breaker

There was a total transactions of 4,269 private residential units (excluding Executive Condominiums) in Q1 2020. This represents a 14% year-on-year (YOY) increase from Q1 2019.

Singapore Property Transactions 1Q 2020

Traditionally, the first quarter of the year sees lower sales volume due to new year season. Q1 2020 transactions was a result of sensible pricing by developers in the primary market. It’s also supported by affordable price quantum provided by launched projects.

Of which, the Top 5 best-selling projects include Treasure At Tampines, Parc Esta, Jadescape, Parc Clematis and The Florence Residences.

Singapore Property Market During Circuit Breaker

With the introduction of Circuit Breaker commencing 7 Apr 2020, the private property market saw a plunge during the two months. Transactions recorded only 647 units in April and 660 units in May 2020.

Compared to previous year figures, there were 1,541 units and 1,843 units transacted in April and May 2019 respectively. The restrictions have indeed dampened the April and May 2020 figures.

Singapore Property Transactions During Circuit Breaker

One important phenomenon as observed is that new home sales picked up while the resale segment continued to slow.

Homebuyers have became more adapted to virtual viewing and they are more comfortable to deal online. Moreover, attractively priced projects and low interest rate environment continues to lure more investors to enter the market.

However, the inability to view properties physically continued to hit the resale market. Resale homebuyers usually prefer to examine the units in person before any dealings.

Singapore Property Market Full Year 2020 Outlook

2020 Volume Activity Outlook

With reopening of the economy, an estimate of 14,500 to 15,500total private homes will potentially change hands for the full year.

New home sales will likely contribute 8,000 to 8,500 units, barring a second wave of Covid-19 cases and climbing unemployment rate.

Price Points

We see that 73 – 95% of the units are valued below $2 million based on new home sales transacted in the first five months of 2020. This can be partially attributed to the sale a higher number of smaller units by developers. Also, HDB upgraders are supporting the demand for these new properties.

Breakdown Of Take-up By Price Range

Price Outlook

Developers’ holding power continue to be strong. Households are not over-leveraged generally. Hence, we do not expect to see a sharp drop in prices.

As part of the stimulus package, home owners are allowed to defer their loan payments. Coupled with the low interest rate environment, this will mean that the probability of increased fire sales remain low. Home owners and investors will be able to hold through this tough time.

Overall private home prices could fall by up to 3%, barring further exacerbation of the pandemic.

Unit Size Demand

Sizes in the range of 500 to 800 sqft continues to be the most popular category in the first five month of the year. The price quantum for units of such sizes are more palatable. Home stayers and investors continue to remain price sensitive.

Breakdown of Take-Up By Size

Looking Ahead On Singapore Property Market

There is no clear signal of how much longer the pandemic will linger around. However, we are beginning to see signs of recovery as buyers get used to the new norm. Those looking to start a family or a place to park their investment fund will start to return to the market.

Low Interest Rate Environment

A subdued economy will translate to more sensitive pricing by developers and sellers, thus keeping the property prices in check.

Interest rates are likely to remain low in the near term, and this will support the financing of homes. US Federal Reserve has pledged that it would keep its benchmark interest rate near zero through 2022.

Sibor Rates

Economic Growth And Property Price

While the road to economic recovery will be a long and arduous one, the long term outlook for Singapore property market remains positive. We expect prices and demand to track closely to Singapore’s economy.

Historically, the residential market has recovered after each crisis with prices keeping pace with economic growth, pointing to a resilient nature of the property market.

Economic Correlation With Singapore Property Market

Singapore has always focused on building business-friendly policies, upholding a transparent regulation and a stable political environment. In addition, the government has implemented stimulus package amounting to nearly $100 billion to prevent a potential economic and financial fallout.

Unemployment Risk

However, a key risk on the residential property market weighs on the unemployment rate in Singapore. Income and job security clouds fear in the buyers and investors out there in the pandemic-hit world.

Past data showed that unemployment rate pegged closely to with home purchase, less some exceptions. For instance, during the SARS crisis in 2003, new home sales plunged as unemployment hit 4%.

While businesses are affected by the pandemic, thereby impacting the job market, the government’s effort on protecting livelihoods and creating new jobs will support employment.

Unemployment Rate And Singapore Property Take-Up Relationship

The New Norm

The unapologetic virus has caused the world to change and affected the way people live. The real estate industry is not spared either. Work processes have evolved rapidly, with the adoption of technology and digitalisation.

In fact, the weekly new home transactions volume has been increasing steadily over the Circuit Breaker period. One can infer that homebuyers are adapting to the new way of purchasing properties as well.

They are now embracing the physical to digital shifts, where technology is no longer an option. Such change will only become more prevalent and important even in a post-Circuit-Breaker and post-Covid-19 world.

Singapore Property Take-Up Over The Circuit Breaker Period
New Private Home Sales By Different Marketing Agencies During Circuit Breaker From 7 Apr 2020

Meanwhile, some homebuyers are already seizing pockets of opportunities as prices fall to match the subdued market condition and outlook.

It’s time to embrace the new reality. Maker sure you have run through the numbers to calculate your potential ROI before making a purchase. Happy investing 🙂

Published with StoryChief

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