Your Essential COVID-19 Singapore Property Guide

Part 1 - How will COVID-19 (Corona Virus) affect Residential Property Prices in Singapore? 

My Singaporean friends living in the UK are moaning about the UK property market being bought to an almost complete standstill due to the COVID-19 lockdown. In fact, UK economists have warned that the corona virus crisis will wipe off more than £30,000 off the average value of a UK home. According to The Telegraph, forecasts vary, but analysts can mostly agree on one thing: prices are going to fall. Some predict a 3% drop in 2020 while some even forecasted to be a 13% drop.

Then just the other day, my friend from Hong Kong chatted me about how Hong Kong property prices are falling amid Covid-19.  Analysts: Hong Kong is poised for another real estate crisis as falling home prices drive more mortgage borrowers into negative equity.

What is going to happen to Singapore?!!

Singapore having over 92% home ownership obviously means most of us are residential property owners.  How can we not worry??!!  I dread to think what COVID-19 Corna Virus will do to Singapore’s residential property market.  Will we enter into an impending property crisis?  I am no crystal ball but let's look at some recent market data as our basis of analysis.

HDB Resale Price Index

Source: HDB, Straits Times Graphics

Based on recent (April 2020) data from HDB, HDB Resale transactions fell from last quarter 6,339 to 5,893 in the first 3 months. On a quarter-on-quarter comparison, this is a 7% drop compared to last quarter. However, on a year-on-year comparison, 2020 Q1 number is still 21.9% higher than 2019 Q1. 

It’s no surprise that HDB Resale transactions has been affected by the Circuit Breaker predominantly due to the following reasons:

• House viewings have ceased during this period.  Virtual viewings not counted!
• Economic uncertainties may have caused some sellers or buyers to put their plans on hold (be it upgrading or otherwise).

Despite the drop in HDB Resale volume, HDB prices remain stagnant.  In fact, the prices of HDB resale flats are seen to remain steady, maintaining the past five years trend with minimal fluctuations of /- 1%.

If the pandemic outbreak persist, Singapore (very likely = will) enter into recession given the significant uncertainty over the Covid-19 situation.  

Should the health crisis worsen and unemployment creeps up, overall HDB prices might drop.  Taking a general view, I expect the drop to be marginal.  Demand for HDB will prevail.  HDB is deemed to be relatively affordable to most home buyers (especially families who prefer a smaller home loan and are after more space).  Also, the valuation of HDB at central region, mature estate with amenities or sought-after areas that are near MRT stations tends to be stable.  In fact, popular area like the Pinnacle@ Duxton was recently sold at another record-high price again.  Just in May 2020, a five-room HDB unit (1,151 sq ft) at The Pinnacle@Duxton was sold for S$1.232 million!

 

Above is an overall view of HDB resale market without dwelling into the finer details.  We will take a look at HDB volume and price trends by room type and districts in a separate blog post. 

I am also an owner of a Private Residential Property!  Will the valuation of my Private Property decline?   

According to recent (April 2020) Urban Redevelopment Authority’s (URA) released data, Singapore’s Private home prices have also experienced a drop in 2020 Q1 2020 on a quarter-to-quarter comparison before Circuit Breaker measures – a 1% drop in 2020 Q1 from 2019 Q1.  However on  Year-on-year, private home prices in the first quarter are still up 2.4% from 2019 Q1.

These are the key reasons we think that are contributing to the downward pressure on the volume and prices of private property homes sales with Covid-19 hit:

• Circuit Breaker & travel restrictions have dampen private residential property sales. With the restriction of foreigner visitors into Singapore, the hardest hit will be the High-end luxury properties within the Core Central Region.
• The closure of sales galleries or show flats and also stay home measures had literally ceased physical viewings. Not counting the rare occurrences whereby buyers are comfortable to commit to a sale via virtual property viewing. 
• As for private resale property market, it is challenging to get a fresh valuation particularly for older resale properties during a near lockdown. Without a fresh valuation done means a less than ideal approved loan quantum for the home buyer. Consequently, home buyers are likely to put off from buying that dream home for the time being.

Here's also an important note that I have advocated constantly before.  It can’t be stressed enough:  Please do your due diligence and practise financial prudence before committing to your home purchase.  I am sure you did not over-leverage.  So if you are still servicing your home loan (which most of us is likely to fall within this category), there’s no need to get into any panic selling!!!

But this does not mean that you stay at home and do nothing.  Contact us to find out more how to achieve potential savings! 

Marginal, Short-term & Temporary Residential Property Market Impact?

The impact of the COVID-19 has already affected buying sentiment. The only question is to what extent will the impact be?

Residential Property Market will not come to a complete standstill. Despite the Circuit Breaker, below are some examples of the New Launches with units being sold during Circuit Breaker since 7th April 2020. Data accurate as of 28th April 2020:

1. Garden Residences
2. Florence Residences
3. Tapestry
4. Riverfront Residences
5. Daintree Residences
6. Piermont Grand
7. Hillion Residences
8. Treasure
9. Jadescape
10. Mayfair Modern
11. Parc Clematis
12. Stirling Residence
13. Kopar@Newton
14. Kent Ridge Hill
15. Parc Esta
16. Marina One
17. Boulevard 88
18. The Tre Ver

Most property sellers are not under pressure and able to hold on their properties. Underlying demand from property buyers are seen to remain unchanged. Demand will pick up. Property consultants potentially foresee a surge after the outbreak.

Here's the Burning Question - after the outbreak?  Will Cornavirus even end?  

Historical trends have shown that financial crises have had a greater impact on property selling prices as compared to a viral epidemics.  The sales volumes and prices dip during the Global Financial Crises (GFC) which lasted from April 2007 to March 2009.  However, property sales volumes and average unit price rose marginally after Sars outbreak and also H1N1 outbreak.  2007 GFC is a consequence of less credit and an imbalance of supply and demand.  Therefore, a greater impact on pricing.

There have been divided views though. Some of us liken the current virus outbreak to an economic crises as it  has directly put a pause on the global economy activities. 

Perhaps taking reference from past pandemic outbreak is of little relevance because Cornavirus is not the typical pandemic outbreak. It's much more contagious than Sars. It is spreading much faster than past pandemic outbreaks. Given its widespread nature, this is pandemic is on a global scale. Containment measures has led to lockdowns devastating the global economy. 

In fact, World Health Organization (WHO) appeared to suggest that Cornavirus is here to stay.  Nobody know for sure when the vaccine will be developed.  As long as there is no vaccine, the Cornavirus can spread to any parts of the world.  No effective treatment is found.  Anyone could be at risk. In any case, even if the vaccine is developed, I expect that will not happen immediately. It will probably take years.

What I observe is some countries including Singapore are preparing themselves with the aim towards easing measures safely.  The key is to focus on containment of the virus and work towards letting economic activities to return.  If I wish to take a more optimistic view, we do recognise that Singapore is ranked as World's most open and competitive economy  in the World Economic Forum’s 2019 Global Competitiveness Report.  

Navigate the new normal 

If Circuit Breaker is lifted as scheduled on 1st June 2020, I do expect safe distancing measures would still stay.  "IF" - to be deliberated with caution as the last thing anyone need is a new wave of infection just when virus spread appeared to be under control.

And even if measures are eased, it will take some time for the economy to regain its momentum.  New social norms would appear.  WHO has already cautioned us to prepare ourselves for a new way of living and working.  We need to continue to adapt our lives and approach to prevent virus transmission.

Eventually, as all of our lives are back to the "new normal" as we get used to living with the virus.  While Singapore's economy will be expected to take some time to recover, property investors will exercise prudence but home buyers who need a home for own stay would still continue home search.  Buying sentiments will pick up. 

   

So perhaps even before the cornavirus ends (if it ever disappears?), life will be back to some degree of normality.  And to me, that means we have to get used to living with the virus for the foreseeable future.  I liken the rainbow to mean a celebration for us to strive towards achieving that degree of normality.  

'The Storm shall pass and deliver a Rainbow'

 

Do look out for Part 2 of Your Essential COVID-19 Singapore Property Guide.  Thank you for reading my blog post.

📬Let's chat about property.  Whatsapp Karen Woo @ 9159 2692 for an non-obligatory chat.

Reference: https://www.straitstimes.com/singapore/hdb-resale-and-rental-volume-down-prices-stagnant-amid-covid-19-outbreak