Property Prices To Remain Soft In The Coming Months

Property prices are expected to remain soft in the coming months due to escalating tensions and growing economic uncertainties.

The future of Singapore’s property market remains uncertain and a full recovery may take a while, given the evolving COVID-19 pandemic and the impending macroeconomic crisis, according to OrangeTee & Tie.

Urban Redevelopment Authority (URA) quarterly statistics showed that private home prices rebounded 0.3% quarter-on-quarter in the second quarter of 2020, after declining 1% in the previous quarter. The price hike was led by the non-landed Core Central Region (CCR), which saw a 2.7% increase in prices. Non-landed home prices in the Rest of Central Region (RCR) fell 1.7%, while the Outside of Central Region (OCR) posted a 0.1% increase in prices.

For the first half of 2020, overall prices dipped 0.7%.

“While the price decline looks like a reminiscent of the 2008 and 1997 economic crises, the price correction did not seem to be as severe as initially feared,” said Christine Sun, Head of Research and Consultancy at OrangeTee & Tie.

“The URA price index dipped 4.6% from Q2 to Q4 1996, around six months into the Asian Financial Crisis. Prices had similarly declined 8.3% from Q2 to Q4 2008 during the first six-months of the Global Financial Crisis.”

She noted that private home sales in Q2 2020 were adversely affected by the pandemic as well as the stricter safe distancing measures enforced during the circuit breaker period, which also saw show flats closed.

In Q2 2020, the total number of transactions fell 37.6% to 2,664 units, according to URA quarterly real estate statistics. The secondary market posted a bigger quarter-on-quarter drop of 55.1% to 933 units. New home sales, on the other hand, fell 20.3% to 1,713 units.

“Despite the fall in new sales, there is sporadic evidence of ‘green shoots’ in certain areas where buyers were snapping up good bargains at selected new launches,” said Sun.

“Demand was also resilient at some luxury projects which continued to draw buying interest from well-heeled locals and foreign investors.”

Notably, 41 new non-landed homes were transacted above $3 million in Q2 2020, while five new condos were shifted above $10 million, higher than the two units sold in the previous quarter.

Based on URA Realis data, new non-landed home prices within the CCR fell 4.5% quarter-on-quarter to a median unit price of $2,365 per sq ft (psf) last quarter, while those in the RCR and CCR rose 2% and 3% quarter-n-quarter, respectively.

The resale market saw non-landed home prices in RCR and OCR dip 0.2% and 0.7%, respectively. Resale condo prices in CCR, however, increased 8.9% to $2,042 psf in Q2 2020 from $1,875 psf in Q1 2020.

Despite the macroeconomic uncertainty caused by the pandemic, Sun noted that buying interest from locals “helped to keep the private residential market afloat”.

URA Realis data showed that Singaporeans accounted for the bulk of non-landed home buyers in Q2 2020, accounting from 80.5%. The figure is the highest since Q1 2009 at 82.5%.

Foreign buying interest (Singapore PR and non-PR) also remained healthy even with the global lockdowns. Although the number of condos acquired by foreigners fell from last year, triple-digit sales were posted in Q2 2020 as PRs purchased 350 units, while non-PRs bought 120 units.

“Last quarter, more than half of the caveats (243 units) of foreign buyers were indicated as ‘foreign unspecified’ in URA Realis. Of those that reported their nationalities (227 units), 43.2% were Mainland Chinese 98 units, 16.3% were Malaysia (37 units), and 12.8% were Indians (29 units),” noted OrangeTee & Tie.

Looking ahead, Sun expects prices to remain soft in the coming months due to escalating tensions and growing economic uncertainties.

“We estimate that overall prices may dip up to 3% this year. Around 14,500 to 16,800 private homes could be transacted this year, of which new home sales may constitute around 7,500 to 8,500 units,” she added.

Source: Property Guru 2020 September

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