Sales of new private home plunge 12% in the first quarter 2020, amid disruption from the COVID-19 pandemic.
Many are of the opinion that it will deteriorate further as Circuit breaker restrictions are in force.
According to URA sources, Developers sold 2149 homes ( excluding EC) in the first quarter , a 12% down from the 2443 units sold in 4th quarter 2019.
One of the reasons why lesser units are sold is because developers released fewer new units for sale in first quarter versus last quarter 2019. Developers launched only 2,093 private property units (excluding ECs) for sale in 1st Quarter 2020, as compared with 2,226 units in 4th quarter 2019.
Along with the fall in sales, URA flash estimates also show private property prices declined by 1%.
But this price fall is still not as severe as compared to past crisis.
In 1996 start of Asian Financial crisis, the fall was 1.9 per cent and in 2008 Global Financial Crisis the fall was 2.4 per cent.
Ever since COVID-19 started, I find that most buyers became more opportunistic, more prudent and highly price-sensitive, and they will go for new launch that are attractively priced.
A research by EdgeProp has shown that since Apr 7, when circuit breaker was announced, a total of 573 new launch sales were transacted. This is quite a substantial number because all showflats are closed, and all meetings or viewing postponed, only virtual tours and zoom video conferencing are used.
Singapore’s property market recovery may be slow as predicted by many research personnel.
Christine Sun, our OrangeTee Head of Research has said that prices of private homes for the entire year could decline up to 4 per cent if COVID-19 continues to drag on.
Although there is pent-up demand, I could possibly only see a rise in buying activity when the COVID-19 measures are eased.
With changes in circuit breaker rules, and if viewing is restored, only then will you see more activities or sales after this prolong period of home isolation.
Home Prices By Region
The prices of non landed properties by region fell mostly across all market segments.
- In CCR, it fell 2.2 percent in first quarter
- In RCR, it fell 0.5 percent
- In OCR, it fell 0.4 percent
Supply in the Pipeline
As reported in URA statistics, there will be a total supply of 48,868 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals. This is less than the 49,173 units in the previous quarter.
New private home sales in 2019 was very good, it rose to 10,104 units, or a 15% increase from 2018. This signals a resilient housing market as conditions in 2019 are favourable with a low unemployment rate.
The new private home sales had a good run in 2019, due partly to HDB upgraders who upgraded and bought new inventory from developers. Many of these buyers of new property were previous HDB owners.
Majority of these transactions were in the suburbs, outside of the central region as HDB upgraders usually look for properties near their previous homes or in neighbouring HDB estates
But for 2020, some consultants, like JLL, are projecting the whole 2020 sales to slump to about half of the 9,912 units sold in 2019 due to the COVID pandemic.
Is it a good time to buy now ?
Sales volumes for new private homes tumbled in April as developers were forced to shutter sales galleries and prospective buyers cannot view properties. New private home sales for April was down 58% as compared to March 2020. Only 277 units were sold against 660 units in March.
Of these 277 units, a 36% or 102 units are from CCR.
Experts say the steady sales of units in the CCR is not a surprise because many many affluent buyers are seeing the weak economic outlook (due to COVID) as a good opportunity to grab a good purchase.
These wealthy buyers are not affected by affordability but they are more concern on long term returns on their property investment.
These buyers who buy during the pandemic, are opportunistic buyers who are confident of the longer term price growth of their investment after Singapore emerges from recession or out of this COVID downturn.
The slight dip in prices and the special discounts offered by developers has motivated these wealthy buyers to seek out potential luxury homes to purchase.
According to URA Realis, the number of luxury projects continued to move units after circuit breaker was implemented. This includes Boulevard 88, Midtown Bay, Van Holland, Kopar at Newton, and Neu in Novena.
Strong sales for luxury homes is indeed a indicator that despite the pandemic, Singapore remains an attractive investment destination for the wealthy investors and a safe haven to park their funds.
Foreign Buyers
Foreign buyers contribute to a large proportion of buyers, 27% in 1st quarter 2020. And Chinese buyers remained the top foreign group in Q1 2020, followed by Indonesians, Malaysians, and American.
Chinese buyers have been very active in nearby Asian hot spots like Shanghai, Seoul, Sydney and Singapore.
Hong Kong used to be a favoured destination for Chinese buyer due to its proximity to mainland China and fewer market restrictions. But recent mass protests have prompted many rich Chinese to consider Singapore as an alternative.
But recently because of travel restrictions, these Chinese buyers cannot visit Singapore. Their usual practice is to do a final inspection before purchase. Hence foreign buyer has reduced.
We expect demand from HongKong may flow in.
Because on May 22, China announced plans to impose a national security law in Hong Kong, sparking mass protests, and prompting US to declare that Hong Kong had lost its autonomy.
These developments have prompted renewed interest by many Hong Kong residents to seek relocation options or to seek property investment in Singapore.
According to data from Singapore’s Urban Redevelopment Authority, buyers from HongKong bought 36 non-landed homes in the second half of 2019 after anti-government protests erupted in the city.
This social unrest in Hong Kong have cast a positive spotlight on Singapore again to be a good alternative investment destination.
Local Demand
Singaporeans continued to make up the bulk of the buyers, accounting for 78% in Q1 2020 and 81% in April 2020.
During this months of April and May, buyers are getting more receptive to the virtual way of viewing new launch and many sales were made.
May sales has shown encouraging signs, and it will likely exceed the April figure. This shows demand for property is still very resilient, and buyers are buying into the long term fundamentals of Singapore instead of focussing on the short term uncertainties.
Many investors are streaming back into the market to pick up some value buys. As shown above, the number of luxury home sales in the Core Central Region (CCR) has been rising over the past few months.
Those private condos with good location, attractive prices, near MRT or amenities or near to downtown core region will continue to attract investors.
As mentioned, 573 new transactions were made since April 7, (when circuit breaker started), these transactions are across many postal districts from district 1, 2, 3, 5, 7, 9, 10, 13, 14, 18, 19, 20, 21, 26, 27. Many RCR and OCR properties were sold during this circuit breaker period.
Historically, I have seen private property housing sales volume or prices dip during crisis, but demand recovers shortly after in the next few quarters. This presents only a small window of opportunity for buyers to buy a property during a price correction period.
Many investors who bought new private homes during a crisis downturn and resold them subsequently have made attractive profits .
A good example is the Global Financial Crisis in 2008. Most people who bought during this financial crisis in 2008 made the highest gross profits as compared to other buyers who bought properties during other periods of time.
Eg.
New Launch Clover by the Park in 2008, bought at $750psf or $937,000 for a 1249sf 3Bedroom. Now they can sell at $1,800,000 or $1440 psf. That is a gain of $690psf almost 90% profit.
During this COVID stage, we expect developers to continue to sell their outstanding stock and take a measured approach to land acquisition.
With most of the past enbloc properties already launch, we will see the number of new project launches to decline after 2020.
New government land sales have also been fewer so not many new projects will be launch too.
With fewer private homes slated for completion after 2023, we predict that prices and rents of private homes will likely remain strong in the long term.
We believe the housing market in Singapore is stable due to sound and sustainable housing policies, which has ensured continued affordability.
Since 2010, Singapore has introduced numerous cooling measures to prevent home prices from rising to unsustainable levels and ensure affordability for the median household.
The government has also set out to increase housing supply with government land sales for private condos as well as increase the Build To Order (BTO) supply.
Singapore’s housing policy has addressed both demand and supply issues to prevent prices from increasing too rapidly.
We see there is limited downside for the Singapore residential market as prices are affordable and the government will continue to track prices against income growth.
So far, I have not seen many homeowners defaulting on mortgages because the past cooling measures such as TDSR has made most homeowners prudent in their mortgage loans. Their housing loans were capped by the borrowers gross monthly income, hence not many had overstretch their funds.
In addition, the recent government budget announcement also offered help to these homeowners. They can apply to defer their principal sum or interest payments on their mortgages.
I must also look at the rental market to establish the resilience of the Singapore property market.
RENTAL MARKET
Investors who are involved in Singapore real estate have long term view of their property investment.
Singapore is still a safe haven for this investors despite the current economic slowdown.
Our strong basic fundamentals have attracted foreign investors all these years, our ease of doing business here, the transparency, safety and political stability of the country will remain unchanged.
Singapore’s private properties have yielded positive capital appreciation over the past years.
Based on URA’s price index, the prices of properties have risen across all market segments. It has also undergone and improve after all the crises including SARS, the Asian financial crisis and the global financial crisis.
So it is still a good market for those who intend to buy properties for rental income. After many years of poor rentals, the trend was reversed in 2019 and the rental market has seen higher transaction volumes and occupancy rates.
Despite the pandemic, rental demand is still strong, with more leasing transactions and rental renewals recorded in Q1 2020.
Conclusion
Many economists have different views of the global economic outlook. Although there is a growing consensus of a protracted slowdown, with recovery gradual in the months ahead, all this still depends on how fast all the countries reopen their economies.
For the real estate market in Singapore, however, buying activities may rebound in some locations when circuit breaker measures are halted.
And after travel restrictions are lifted, some foreign buyers may return.
Over the last past two years, Chinese buyers have formed the biggest foreign buyer group with 2,637 or 7.3 per cent for non-landed private properties. Followed by Malaysians at 4.3 per cent, Indians at 1.9 per cent and Indonesians at 1.6 per cent.
I expect more Chinese buyers will return especially those who want to divert their funds overseas as their currency continues to depreciate.
With this foreign buyers returning and the improved local demand from both upgraders and wealthy buyers, I expect to see Singapore’s property market to remain resilient in the months ahead.
If you want to know more about how Singapore Property market will stay resilient in future, please do contact me for a online zoom discussion.
Schedule time with meWritten by Rick Fok
Rick Fok is a realtor with OrangeTee & Tie Pte Ltd. He has been in this real estate business for 10 years. He is very focus in helping his clients rent properties and he does help many customers to buy new projects according to their needs. His interest include sports such as running and soccer besides just real estate work. He loves to connect with people to discuss properties related issues and gets enormous satisfaction in helping them fulfill their needs
If you have any queries on this topic or other , please do give Rick a call and he can arrange for a discussion over a cup of coffee.
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