Key Driving Factors for Singapore’s Property Market
The fears and uncertainty amidst this pandemic are real and concerning to many – especially new property investors who are wary of all the unknowns.
With less than positive news about the economy and unemployment rates on the rise, it is understandable why many new property investors are fearful of getting into the market now.
On that note, I felt it would be a great opportunity to share insights on some of the key driving factors for Singapore’s Property Market.
Using numbers, statistics, and trends, I hope to shed some light on why I think there is a much brighter outlook on the horizon.
Table of Contents
Property Price Trend
If you are believer in trends, looking at this chart on Singapore property market will help to put your mind at ease.
Like any other cycles, we see the private residential property price index go through its fair share of dips and peaks.
Remember the major economic upheaval in the 1997 Asian financial crisis, and the Global financial crisis of 2007-2008?
They are but blips in the bigger picture. The key here, however, is the clear overall uptrend.
For property investors who are in it for the long run, this strong growth trajectory projected into the future will give a much-needed confidence boost.
The common warnings during any economic crisis in the past and now, will be about how the property market will enter a glut and stagnate.
This fear-mongering will definitely scare off property investors who have not done their homework or are looking for a quick win. But the trends show otherwise.
Who do you trust? The real numbers or someone’s opinion?
Supply and Demand
Familiar with the common economics principal of supply and demand? We explained this in detailed in our previous article What Does It Mean To Buy Property At The Right Time.
“If there is a decrease in supply of goods and services while demand remains the same, prices tend to rise to a higher equilibrium price.”
How does this affect the Singapore property market you may ask?
Let us take a look at this chart which shows the completed supply of private non-landed properties from 2015 till now.
The dotted line represents the average past 10 years of completed private non-landed properties which is 13,855 units.
A quick glance at the chart shows us that from 2015-2016, there was a clear abundance of supply, whereas in 2019 and 2020 there is a significant under supply compared to the average.
How does this translate into property prices?
Property price trends show us that in 2017-2019, as the completed property supply numbers came down, prices started to appreciate significantly.
A market correction for the under-supply in the recent years. This is a trend that is likely to continue, at least into the immediate future due to the under-supply expected this year and next.
Combined with the effects of a recovering economy post-pandemic in the near future, this could fuel new heights of property purchases in the next couple of years.
HDB Upgraders
Do you have a relative or friend who have their eyes on upgrading to a private non-landed property?
Chances are that you will know someone like that. In Singapore, many of us worked hard and constantly upgrade ourselves.
Hence, upgrading our homes are also a common phenomenon.
Especially when they are in their mid-30s or 40s, have more disposable income on hand and are looking for a second home befitting of their new economic status.
This is not just a hypothesis. The numbers reflect this too.
The chart above shows how the trend of increasing numbers of HDB flats reaching their minimum occupation period (MOP).
Which means they can now purchase a second home, and the trend is that more owners are making the upgrade.
Our numbers show us that more than 3 times the number of BTO owners are looking to upgrade to a private non-landed property.
So, what does this mean for the future?
The chart shows us that the numbers of HDB flats reaching their MOP are going to maintain at this all time high, over the next 3 years.
This is due to a large supply of BTO from 2012 – 2014. This means we can expect a lot more of these HDB upgraders on the lookout for their second home.
With a potential demand boost, combined with the under supply we discussed earlier, we can expect a significant appreciation and growth in property prices.
Perfect for the property investor who has already gotten a slice of the pie.
In fact, based on a Morgan Stanley Research report, 46% of private home sales are made up of these HDB upgraders we have been talking about.
Additional Driving Factors currently in play
Singapore’s cooling measures
As we know, cooling measures in Singapore kicked in since January 2013.
It has proven to be effective as we have not seen significant numbers of homeowners defaulting on their mortgages.
Cooling measures such as the TDSR (Total Debt Servicing Ratio), Mortgage Serving Ratio (MSR), Additional Buyer Stamp Duty (ABSD) and Seller Stamp Duty (SSD) have changed the landscape of property investment and behaviours of property investors alike.
Instead of earning quick profits through property speculation, investments are considered as longer-term commitment with dedicated analysis and studies of its future potential gains.
New Launches attractive discounts with virtual viewings in play
It is no secret that everyone loves star-buys! With virtual viewings during this period, comes new launch discounts that is well-timed and handy for genuine buyers.
There is no doubt that an actual show flat will provide an up-close sense of the unit, virtual viewing can also offer most buyers a good feel of the house.
Some buyers would not mind purchasing despite not seeing the actual unit.
Other than its tangible factor and interior visualization at the showroom, most of the decision-making factors for example, the unit’s facing, floor level, layout, facilities can be made without being physically at the show flat.
Coupled with discounts thrown in during this period, buyers are getting great deals too.
Besides, virtual viewings and tours are becoming a norm since Circuit Breaker in Singapore.
It is generally welcomed and accepted by most who are working from home, especially with kids.
Temporary Relief Measures
Temporary relief measures were announced as part of the Singapore’s budget, in early May 2020, to assist married couples and property developers:
ABSD remission period is extended for the sale of matrimony homes
Singaporean couples are typically given six months period, upon purchasing their 2nd matrimonial home, to sell their first matrimonial home.
For completed property, it will start from the date of exercise. For uncompleted property, it will either start from Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC), whichever is earlier.
So, for couples who has failed to qualify for ABSD refunds from Feb 2020, this is excellent news!
They are no longer required to rush and put up their first matrimonial home for sale – no panic selling.
Extension of sale timelines for Property Developers
Similarly, developers are compelled to sell all units within a strict time frame. Otherwise, they will be confronted by either ABSD or Qualifying Certificate (QC) penalties.
With the extension of timelines, it allows market conditions to stabilize naturally. In turn, prevent unnecessary panic selling by developers which is very likely to create upheaval and a detrimental cascading effect in the market.
As a result, we may be able to see more discounts given by developers.
Mortgage deferment scheme
The Monetary Authority of Singapore (MAS) also announced in March 2020, a relief measure for homeowners to defer their home loan repayment and insurance premium payments.
With this flexibility of deferment, property owners are secured, and property market is kept stable – again, no panic selling of homes during this challenging period.
Foreign interest in the Singapore Market
Foreign interest from Mainland Chinese has been the leading foreign buyers in recent years and they may just continue to remain at the top.
While China’s economy is likely to experience a slowdown this year, there are still growth in specific sectors such as IT, biomedicine, and healthcare.
Not to mention the recent global lockdowns has seen an explosive growth and surge in production and consumption of e-commence goods – China being the powerhouse in this area.
Hence, we expect Chinese buyers from these thriving sectors to buy homes in Singapore. Some may prefer to redirect their refunds overseas while their currency continues to depreciate.
Recent episodes in Hong Kong will also serve to as an encouraging factor for Chinese buyers to consider Singapore’s property market.
Conclusion
I shared more about other key driving factors like lower interest rates, developer’s incentives due to new policies on ABSD, under-priced properties and more… in our popular article What Does It Mean To Buy Property At The Right Time.
In the midst of every crisis lies great opportunity
Want to learn more as you re-evaluate your property investment strategies? Let me guide you along.
I will provide:
-An IN-DEPTH Financial calculation
-Highly relevant investment insights
-A curated list of the best buys in today’s market with good upside potential and minimal risks
-Proven methods and steps
Lets get in touch today to kickstart your property wealth planning journey.
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Self Introduction
Rick Huang, Associate Deputy Group Director of OrangeTee & Tie, has been in the Real Estate industry for a decade.
He is driven, committed and is enthusiastic about real estate investments.
Today, he leads Team Youhome.sg, and together, he aims to provide his clients with the best experience in their property journey.
The team focuses on understanding the client’s finances and needs and is determined about delivering the best solutions and results for them.
Amidst the hustle and bustle, Rick enjoys quiet time and indulge himself in the intricate art of tea-brewing and teapot appreciation.
He would also take this chance to energize himself and reflect on his personal development and areas of improvement.
