CAN THE SINGAPORE PROPERTY MARKET WITHSTAND THE SHOCK OF THE COVID-19 SITUATION?
I) Let’s hear what the analysts have to say:
Sales Volumes are expected to plunge in Q2 2020, as show galleries remain closed during the circuit breaker period,” said Christine Li, Cushman & Wakefield head of research.
A fair correction in prices is expected in 2020, but not to the magnitude of the 24.9% plunge over four quarters during the Global Financial Crisis (GFC) , said Ong Teck Hui, JLL, senior director, research & consultancy. Colliers’ Ms Song also thinks prices will not plunge like they did during GFC as there was rampant speculation and loose credit prior to the GFC.
The nine rounds of property cooling measures in 2009 – 2018 have reined in speculation and price increases over the past three years were more sustainable.
This time, the government has extended measures to help save jobs and alleviate cashflow woes, including getting banks to defer home loan payments till end of the year. These should help reduce distress and fire sales in the property market in the near term. Ms Song said.
Source: BT dated 25 April 2020
II) Let’s take a look at the history of Singapore Property Market and its Cooling Measures
Source: BT 16 May 2020. Have property cooling measures lost their punch?
Back in the 1990s – a period of speculative buying or “flipping” uncompleted properties caused private home prices to shoot up.
Henceforth, in May 1996, the government introduced a package of anti-speculation measures and prices went tumbling down by 8.9% over 4 quarters. Then the Asian Financial Crisis came and dragged prices down further by 39.5% over 6 quarters to Q4 1998. Most of these measures were reversed as the situation became so grim.
Fast forward to 2005 when Singapore went into expansion path, the property boom continued until GFC struck in 2008. This sent price slumping by 25% over 4 quarters to Q2 2009. Thereafter, it started to rebound with foreign buying surging again due to high liquidity.
To slow down investment demand and moderate rising prices, the government re-introduced the SDD & Loan-to-value limit in Feb 2010. As the market remained heated in terms of rising sales volume and prices, the government intensifies the measures and also introduced ABSD and maximum loan tenure from 2011 to Jan 2013. This has helped to slow the rise in price but sales volume remained high.
With property prices rising faster than rise in income level, the government introduced the TDSR in June 2013. This sent prices declining by 12% over 15 quarters.
With the Enbloc fever from late 2016 to 2018, prices started to rise steeply again. As such, the government raised the ABSD and tightened the LTV limit in July 2018.
III) The rationale and effect of the 5 July 2018 Cooling Measures
Backdrop: Private Residential Prices began rising in 3Q2017 after declining gradually for close to 4 years. Prices have increased sharply and Demand has also seen a strong recovery as sales volumes continue to rise.
Rationale:
- Sharp increase in prices, if left unchecked, could run ahead of economic fundamentals and raise the risk of a destabilising correction later, especially with rising interest rate and the strong pipeline of housing supply, said MAS in the press release.
- “The government has been monitoring the property market closely. We are very concerned that prices are running ahead of economic fundamentals,” said Mr Lawrence Wong, Minister for National Development on Thursday (July 5)
Effects:
- Enbloc fever immediately subsided. From S$1B in 2016, S$8.7B in 2017, and about S$10.8B in 2018, to about S$490M in 2019.
- Developers became cautious with their pricing expectations moving forward.
IV) With Covid-19, will the government ease the Singapore Property Cooling Measures?
In this BT article dated 20th Feb 2020, Mr Heng said that ” In Singapore’s context, property is not just an investment, it is a home for people and we must make sure that we get that right.” Hence, easing Singapore property curbs is not on radar.
As Singapore moved into circuit breaker lockdown, the Covid-19 pandemic has disrupted construction timelines and dampened home sales. As such government has rolled out temporary relief measures, giving developers 6 month extension for project completion and sale housing units in residential development projects, relating to ABSD remissions for housing developers; and a 6 month extension for the sale of the first residential property in relation to ABSD remission for the second residential property bought by a Singaporean married couple. (Source: BT 7 May 2020 -Developers get reprieve on completion, sales, ABSD, QC deadlines)
V) What has Government been doing amid the Covid-19 pandemic?
Save Jobs and alleviate cashflow woes, including getting banks to defer home loan payments till end of the year are some of the measures that the Government has done to support citizens’ livelihoods. These should help reduce distress and fire sales in the property market. Agree?
VI) What is the sentiment of the Singapore Developers amid Covid-19?
On pricing, about 54% projected that the new sale prices would decline by 2 to 5% in 2020, and 46% expect a larger fall of around 5 to 8 per cent in resale prices in 2020
31% expect new sale volume to fall by 8 to 10% and 21% said new sales would drop by 20 to 30% in 2020.
About 44% expect the number of units launched to be substantially or moderatly lower in the next 6 months, while 25% expected that the units launched will remain about the same in the next 6 months.
About 22% reported that the developers would either extend project completion time or postpone new project launches to reduce the impact.
VI) Our perspective, what is your’s?
From the above, would you agree with us that the current condition of Singapore Property Market is stable and sustainable?
- As Mr Heng said, “in Singapore’s context, property is not just an investment, it is a home for people.” Prices have been kept in check and to maintain a stable and sustainable property market, Government will continue to monitor it.
- The introduction of TDSR and the tightened LTV limit have foster financial prudence among buyers over the past years.
- The re-introduction of SSD and LTV have curb speculations.
- The latest cooling measures and the Co-vid 19 situation have caused Developers to be more cautious in bidding lands for en-bloc and in their pricing of units for new launches.
Well! with influx of enbloc lands in the past 3 years, I’m sure you would agree that today’s market is a buyers’ market. Though supply may be ample, it is slowly depleting as there is still pent up demands for projects / units with right pricing. In case you are not aware, Condo with S$1 – S$1.5M price tag and with average floor area below 950 sqft ruled Sales in 2019 and is still the same moving into 2020. Hence supply for compact 3 bedroom and below is depleting.
As our PM said, “the Covid-19 pandemic is a marathon and not a sprint.” Singapore economy will go into recession and unemployment rate will go up. So, should you wait and see? Perhaps yes, until the dust settles, provided choices are on your side. Otherwise you might risk your chance to own a home you aspired to have.