Singapore's love affair with property resumes amid coronavirus optimism

Singapore may be undergoing its worst recession since independence, with retrenchments and job losses at record levels, but property-obsessed Singaporeans are still queuing up to buy multimillion-dollar homes.

While the coronavirus pandemic, which has killed more than 1.6 million people worldwide, had hit the pause button on ever-increasing price rises, analysts predict Singaporeans will resume their love affair with property as vaccines come on stream and the country moves into the third phase of its reopening later this month.

One big reason why prices had dipped were lockdown measures that prevented people from going to showrooms to view property launches, but experts now expect the market will rebound next year as Singapore continues to open up.

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The country will move into phase three of its reopening - in which gatherings of up to eight people will be allowed, as opposed to the current limit of five - on December 28. Capacity restrictions for public areas including shopping malls, attractions, and places of worship will also be relaxed.

With the somewhat sunnier outlook in the Covid-19 situation, property prices were expected to rise by an average of about 4 per cent next year, said analysts.

Adding to the optimism are the roll-out of vaccines and a moderate economic recovery. Prime Minister Lee Hsien Loong revealed this week the city state would get its first batch of the Pfizer-BioNTech vaccine by the end of December and that it hoped to vaccinate all residents on a free but voluntary basis by the second half of 2021.

Meanwhile, according to a Monetary Authority of Singapore (MAS) quarterly survey of 23 economists and analysts, Singapore is expected to log economic growth of about 5.5 per cent next year.

The good news would boost the confidence of potential homebuyers over the next two years, said Nicholas Mak, ERA Realty's head of research and consultancy.

"They probably think that this is as bad as it will get," Mak said. "Their mentality is that there's a chance that prices will be higher in one or two years."

The appetite for property had already manifested months before the MAS announcement. Private home sales had risen for five consecutive months from April to September - a result of pent-up demand arising from the "circuit breaker" measures when public viewings were prohibited. There were 1,329 new private home sales in September, a 4.6 per cent year-on-year increase, and the highest since July 2018.

This forward-looking strategy was due in part to the market's stability, which rode out the gyrations caused by the pandemic with help from the government's fiscal measures, said Terence Lian, head of investment sales at realtor Huttons Asia.

With Singapore injecting S$193 billion (US$144 billion) into its economy in four separate Budgets in 2020, the overall unemployment rate stood at 3.6 per cent in September - its highest since 2004, but below the record 4.8 per cent in September 2003 during the Sars crisis. While the unemployment rate inched up by 0.2 percentage points from August, it increased at a slower rate compared to previous months, as local employment grew by about 50,000.

"From an investment point of view, there are good opportunities to consider," said Lian. "No matter how crazy the situation is, the property market is still stable."

Banks have also lowered interest rates on loans pegged to the Singapore Interbank Offered Rate - the rate that banks borrow from each other - to as low as under 1 per cent, which has encouraged more sales.

"The pent-up demand during the lockdown was fuelled also by an ultra-low interest rate environment supported by the strong household balance sheets," said Tricia Song, head of research for Singapore at Colliers International. "As the stimulus effects are weaned off, a global economic recovery should support employment and thus the property market."

Property prices in Singapore are forecast to rise 4 per cent next year. Photo: Bloomberg

The bulk of buyers are expected to be local, and homes in the suburban regions and areas located close to the Central Business District will be snapped up first.

"Going forward, the light at the end of the tunnel will hopefully show up when travel restrictions are removed as Singapore will see a larger number of foreign buyers," said Desmond Sim, head of research for Singapore and Southeast Asia at CBRE. "Let's not forget Singapore has shown strong governance, stability and political neutrality as its selling points."

But while buyers are likely to return with gusto, property analyst Ku Swee Yong warned that demand for property, especially rental, could remain weak for some time. This could, in turn, mean people buying on hope, rather than on fundamentals.

Reports in September revealed that Housing Development Board flat rentals were down by 20.7 per cent, while rentals for condominiums and private apartments dipped by 0.4 per cent compared with last year.

"Many residential investors who are betting on getting tenants will not get any," he said. "They are buying into a hope that the market will stabilise, which I think is unfounded."

This warning was also sounded in October by MAS, which urged households to be prudent when it came to property purchases. At the end of August, the central bank revealed that banks had approved about 36,000 applications to defer payment of property loans worth some S$29 billion until the end of 2020.

"Given that an uncertain economic outlook could have dampening effects on income streams, households should remain prudent in taking up new debt and in committing to property purchases," it said.

This article originally appeared on the South China Morning Post (SCMP).

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