Singapore’s property sector has undergone a roller-coaster journey in 2020 amidst Covid-19 Pandemic. During the April and May circuit breaker era, home prices plummeted to historical lows. Yet property purchasing practices rebounded rapidly through several business segments at the conclusion of the campaign constraints.
Although the coronavirus may continue to cast a cloud on the larger economy, existing headwinds have also been underestimated by financial investors and banking expectations for the future of the Covid-19 vaccines. The pandemic has exacerbated several developments in property and spawned fresh ones that may provide investors with lucrative investment opportunities.
We give a glimpse on how this year will happen to the property sector here, and the main factors to keep an eye on. The property outlook of Singapore depends primarily on the willingness of the government – and global joint initiatives – to rein in Covid-19. If our economy firmly recovers this year, the real estate sector is primed for a gradual turnaround and more price increases.
1. Recovery to speed up momentum on new hope
One of the markets that is defying gravity is Singapore’s property market. We saw good sales for landed assets and the private and housing board sectors amid the pandemic.
In the coming months, we anticipate housing demand and purchasing momentum to pick up more on increasing hope for vaccinations and future macroeconomic recovery.
Many economies will recover healthier from the worst global recession in living memory at a macro stage, while some are likely to come back quicker this year than others. A K-shaped, bifurcated recovery has been noted by many analysts, where some industries rebound more rapidly than others.
Skilled staff in high-growth sectors like telecommunications, healthcare, fintech, logistics and applications have managed to perform well under the K-shaped economic paradigm, while employees in lodging, manufacturing and brick and mortar companies are fighting for survival.
For the rich, the real estate industry has long been a playground. This group’s wealth expansion would bode well for the real estate sector as their stock holdings will begin to rise in accordance with their profits. Many could redirect their wealth to some sort of real estate items, especially residential properties that could offer more reliable returns in the long term, or deepen their investment in them.
For several ultra-high-net-worth people, monetary wealth has also risen. In the wake of the Covid-19 turmoil, the combined wealth of billionaires rose by US$2 trillion (S$2.65 trillion) to US$10.2 trillion, according to a 2020 UBS/PwC Billionaires Insights survey. Many purchased super-luxury homes and high-end houses, which could clarify why the pandemic managed to do well in our luxury home market.
2. The reduction in home supply will continue to help price increases.
The possibility of oversupply in the residential sector of Singapore could be easing soon. It is predicted that the number of new project releases scheduled for this year would be smaller than in previous years.
In the first half of this year, around 20 new inventions will be available for sale. In comparison, in 2018 and 2019, with approximately 25 to 30 residential projects launched in each of the half years, the last collective sales period reported a blockbuster result.
The mass sector and city edge regions would see fewer mega releases. For the last three years, several major ventures have already been completed. In comparison, in recent years, property sales have decreased significantly.
Collective sales operations came to an almost total halt after new cooling steps were introduced by the government in July 2018.
Land supply from the Government Land Sales scheme has already been calibrated by the government. A conservative land slate was issued during the next two years to retain a modest availability of units. For the first half of this year, around 1,600 new houses, far less than the total of 2,700 units released in each half of 2018, will be introduced from the reported list.
More than 70% of their units had already been sold through some new developments redeveloped from the 2017 to 2018 spate of sales en bloc.
Over the past three years, with stable net absorption of new homes, the higher take-up estimates against a cautious supply have culminated in fewer unsold, uncompleted private homes. The total amount of unsold units could be reaching its height, and this year will begin to taper.
With stock decreases and macroeconomic outlook changes, the risk of declining home prices this year is not strong. In the fourth quarter of last year, private home prices grew by 2.1% on a quarter-on-quarter basis, based on the new flash figures from the Urban Regeneration Authority, since increasing by 0.8% in the previous quarter. Overall, private home values for the entire of last year increased by 2.2 percent.
3. Final tranche to be published from the current collective sales period of new homes
This year, there are many blockbuster releases to follow. Such developments are among the last tranche of private homes to be launched from the collective sales period from 2017 to 2018.
There are few and far between, big, freehold prime places. If they skip the purchase chance, consumers who plan to snag a piece of the luxury home pie will have to wait until the next cumulative market period – which typically happens every eight to 10 years.
Midtown Modern, Klimt Cairnhill, Cairnhill 16, Irwell Hill Homes, One Bernam, Park Nova, Perfect 10 the former Liang Court, among others are several widely awaited luxury home releases.
As the building is constructed from the former Park House, which was sold en bloc for a record-smashing $2,910 per sq ft per plot ratio in 2018, Park Nova can be closely monitored.
Normanton Park will be maybe one of the highest-profile new releases this year, with nearly 1,900 devices. The scheme is Singapore’s most comprehensive city fringe creation by far.
The Ryse e, The Reef at Kings Dock, Lavender Residence, One-North Eden and Phoenix Residences, and Provence Residence and Parc Central Residences executive condominiums are other property launches in the commercial fringe and mass-market areas.
4. The emerging HDB sector from the doldrums
Since the government released a range of policy initiatives to boost housing affordability for Singaporeans and raise the appeal of older apartments, the HDB resale sector seems to be recovering from the doldrums.
Despite the pandemic and the rising supply of flats, HDB’s flat-rate resale rates increased 1.5% quarter-on-quarter in the third quarter of last year, following a modest rise of 0.3% in the previous quarter.
For five straight months last year, the monthly resale rate touched more than 2,400 transactions. In the wake of consumer exuberance and stellar profits in recent months, several sellers have increased their asking rates. As several buyers charged cash above valuation for flats in common places, many resale flats were traded overvaluation.
For lower-cost or attractively priced apartments, buying demand would stay healthy. Some resale flats in non-mature estates, for example, attracted strong buyer interest, especially in the Yishun and Woodlands, where prices appear to be lower than in other housing estates.
Some families may continue to downgrade to HDB flats in the soft employment sector, however, couples who are already doing well in their careers may sell their flats and upgrade to private homes. We anticipate that the number of HDB resales may grow from 5% to 10% this year, to about 22,000 to 25,000 units. The prices of resale flats may rise by 2 to 4%.