Property Market Surprise During Circuit Breaker Q2 2020

As Singapore moved into the Circuit Breaker during part of Q2 2020, many expected the property market to tank. The various restrictions in viewings had indeed put a strain on the transaction volume of the market.

Previously we covered the property market during the Circuit Breaker. Now that we have are into Phase 2 of the pandemic fight, let’s take a look at each of the market segment to see how people are actually responding, and what we can expect in the second half of 2020.

Singapore Private Residential Property Market

Overall private home prices in Singapore experienced a marginal uptick of 0.3% came as a surprise. Previously, the flash estimate released by URA earlier in July projected a 1.1% decline in Q2 2020.

Singapore Private Property Market PPI Q2 2020
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This came although the primary (new) and secondary (resale) volume decreased by 20% and 55% respectively on a quarterly basis.

This is attributed to the strong take-up in the Core Central Region (CCR) which saw a +2.7% quarterly price increase. In addition, continued strong demand in the Outside Central Region (OCR) market saw a slight quarterly price increase of +0.1%. This upward movement is partially offset by the -1.7% price decrease in the Rest of Central Region (RCR).

Regional Analysis Q2 2020

Core Central Region (CCR)

CCR non-landed home prices rose 2.7% in Q2, reversing the 2.2% decline in the previous quarter.

Property Market - CCR Trend

In the CCR, we saw a noticeable increase in transactions in the price range from $1.5 million to $5 million. This suggests that wealthy investors are still putting Singapore property market under their radar as a key investment destination.

Rest of Central Region (RCR)

RCR non-landed home prices fell 1.7% in Q2, following a the 0.5% decline in the previous quarter. The softer activity could be due to the absence of new launches in this sub-market, which tend to support prices.

Property Market - RCR Trend

All new home sales in RCR were take-ups from previously launched projects. The top 3 best-selling new RCR developments were Parc Esta, Stirling Residences and Jadescape .

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Based on the median prices transacted, price gap between non-landed CCR and RCR homes has narrowed to 25% in Q2 2020. The narrowing of price gap could potentially generate more interest in the CCR market.

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Outside Central Region (OCR)

Generally this mass market segment is supported by HDB upgraders and owner occupiers. As such, it continued to show resilience even during the Circuit Breaker in Q2 2020. OCR non-landed home prices rose 0.71% in Q2, reversing the 0.4% decline in the preceding quarter.

Property Market - OCR Trend

As seen form the previous chart, the top 3 best selling new projects come from the OCR area. These developments are sizeable, which provided greater selection of units to buyers and investors.

We expect OCR prices to remain daily stable owing to the demand and supply conditions. The pipeline of unsold inventory in the OCR is 30.9% while it’s proportion of new home sales in 1H 2020 was 42.5%. The mass demand in the OCR sub-market is outpacing it’s supply, which could translate to continued support in property values in the region.

Private Rental Property Market

The rentals of private residential homes declined by 1.2% in Q2 2020, reversing the 1.1% increase in the preceding quarter. Landlords are more receptive to lowering their rental rates in view of the economic slowdown due to the Covid-19 pandemic.

Singapore Rental Property Market Trend
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Overall, the rental volume easer by 10% quarter-on-quarter to 19,506 transactions in Q2 2020. The fact that companies are likely to put any expansion plans on hold due to the weak economy, and the travel bans imposed by the country, the inflow of expatriates had been affected. This phenomenon is likely to stretch till the condition improves.

However, in terms of vacancy rate, it remained unchanged in Q2 2020 at 5.4%.

Private Residential Property Market Outlook

Nationality

Singaporeans account for the majority share of new price home purchases in Q2 2020, albeit a drop in absolute take-ups on a quarterly basis by 16.7%.

Will expect sales to foreigners and Permanent Residents (PR) to pick up gradually in the near future as the market become more comfortable to transact digitally and as show flats are allowed to open on a controlled basis.

Unsold Inventory

Due to absence of major En-Blocs and government land sales to top up the supply in the pipeline, coupled with the progressive sale of the units, the number of unsold inventory declined from 29,149 in Q1 2020 to 27,977 in Q 2 2020.

Assuming a conservative estimate of about 8,000 units take-up each year, the unsold stocks couch be cleared in about 3.5 years, which is considered a healthy timeline.

Full Year 2020 Projections

All in all, the private residential home prices has declined by 0.7% in 1Q 2020. Looking at the relatively strong demand amid the weaker economic prospects in the near term, we expect an overall price movement to by between -1 to -2% for the whole year of 2020.

New sales are likely to fall to the region of 7,500 units (excluding Executive Condominiums), down from the 9,912 units moved in 2019. The the low interest rate environment and strong fiscal policy measures to support businesses are likely to support the housing demand and property values. On the other hand, potential downside risk includes severe economic downturn that leads to climbing unemployment rate.

Singapore Residential Property Market PPI Trend
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HDB Resale Market Q2 2020 & Outlook

HDB resale prices increased marginally by 0.3% in Q2 2020, following a unchanged status at 0% in the preceding quarter.

While the market experienced a 41.9% quarter-on-quarter drop in the resale volume in Q2 2020, it doest not necessarily equate to a weaker demand but rather a temporary impact due to the Circuit Breaker that prevented physical property viewings.

HDB Resale Property Market Trend
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Following Q3 2019, HDB resale prices remained relatively resilient and tends towards a marginally upward trend quarter to quarter.

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The top 5 most popular HDB estates in Q2 2020 were Yishun, Sengkang, Tampines, Woodland and Punggol. Based on the prices, we can see a generally more stable prices for larger units.

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We also saw a more sustained take-ups in flats with remaining lease of 60 years and below. This is likely attributed to the change in rules that allowed more flexibility in using CPF funds to buy older flats that was implemented about a year ago.

Overall, we expect the HDB market to remain strong and stable, with a projection of +1% increase in prices for the whole of 2020. This is due to key policies and factors such as a 30% Mortgage Servicing Ratio, owner occupiers demand, and healthy underlying demand for resale flats.

HDB resale volume is projected to be slightly lower at the range of 21,000 – 22,000 units for the whole of 2020 compared the 23,714 units resold in 2019.

Expecting Singapore property market to remain fairly stable for the whole of 2020.

Stay safe and healthy! 🙂

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