COVID-19 has created some adverse effects on Singapore’s business landscape and led us into a global economic recession. The whole world is in lockdown, and the situation has certainly brought about many uncertainties in the real estate market as well. The URA Q1 2020 Property Price Index showed that property prices have dipped about 0.4 - 2.2% across the country.

Is this a Good Time to Enter the Market?

Many have likened COVID-19 to the SARS and H1N1 situation back in 2003 and 2009. As with the stock market, property prices dipped drastically during the early stage of the pandemics. Market confidence picked up after the situation stabilised a few months later. Investors saw the opportunity amidst the crisis and entered the market, making some of the most impressive gains ever.

Although prices have dipped slightly and transaction volume has declined, Singapore’s residential property market is far from stagnant. In the midst of the slowdown, there are still people taking advantage of the downturn to invest, as well as offloading their properties to reduce their financial burdens. Rigorous testings for COVID-19 vaccines for COVID-19 are already showing positive results, and that means that it will not be long before the market bounces back.

A sluggish economy results in lower demand from the mass market = low resale prices = good news for buyers! According to the Singapore Interbank Offer Rate (SIBOR) Rate Historical Chart, SIBOR rates are currently at a 5-year low, and banks are offering very attractive mortgage interest rates.

Recent news has also indicated the influx of China buyers, some without even viewing the properties! These wealthy buyers are snapping up luxury housing to guard their wealth against anticipated inflation and a weakening yuan. What better positive indication is there than having these seasoned investors entering and having confidence in Singapore’s property market during this period?

Will Property Developers Reduce Prices?

Ever since Additional Buyer’s Stamp Duty (ABSD) and Loan-to-value (LTV) limits were tightened in July 2018, developers have been pricing their properties very sensitively. In this soft market that we are experiencing now, prices are close to breakeven point, and it is unlikely that developers will cut their prices further. Construction costs are expected to rise due to extra safety measures, but developers and contractors may absorb the costs to keep transmission low. They are sending a strong buy signal to all you buyers!

Will Property Prices Continue to Dip Further?

Mr Lawrence Wong, Minister for National Development has repeatedly mentioned that the government aims to steady the property cycle and have a sustainable market in line with income growth of about 2-4% per annum. The tightening of cooling measures has prevented many Singaporeans from over-leveraging, saving them from being forced to sell their properties in times like this.

Mortgagee sales will be fewer, and although property prices will dip a bit in the coming months, they will still remain pretty stable. How much prices will decline further will depend on the duration of COVID-19, unemployment rate, and financial health of homeowners. If the decline gets too steep, the government will likely step in to ease some cooling measures, maintaining a healthy and sustainable property market.

Conclusion

Based on our personal views and experience, it is rare to have another occurrence like this in the next decade or two. It is also definitely less risky to enter the market at its slum instead of its peak. OrangeTee & Tie’s Christine Sun cited that “Singapore private residential property typically sees a quick rebound after each economic crisis”, and that “Singapore’s private residential market will remain attractive in the long term”.

Although it may seem long to you before this COVID-19 situation stabilises, vaccines are already on the way and there is no telling how long this golden window of opportunity will stay open. Strike when it is hot!

References:

COVID-19 - Real Estate Investors, the Time is Now

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