Continued low interest rates create a favourable investment environment for real estate. However, a slow and uneven recovery from the global COVID -19 situation is expected to remain volatile. The magnitudes of new sales transactions are expected to continue to increase, while price sensitivity is expected to decrease due to low interest rates. Analysts expect intense competition for land, which in turn will lead to further price increases.
PricewaterhouseCooperss Report Emerging Trends in Real Estate for 2020 for the region Asia-Pacific ranks Singapore as the top market for property investment. In recent years, the prime market in Singapore has suffered from an oversupply of high-end properties and a slow pace in the luxury sector. Competition for prime real estate remains fierce due to limited space and inventory.
Last year, for example, the founder of British electronics company Dyson bought a three-storey apartment building in Singapore’s Wallich Residences for $541.7 million. In recent years, mainland Chinese buyers have been the main driver of demand for luxury residential property, partly driven by the political turmoil that made Hong Kong an attractive investment destination. This trend is expected to continue into 2020, with Knight Frank forecasting 3% property price growth for Singapore in its 2020 global forecast.
In the early 1990s, large-scale urbanisation in Hong Kong, Singapore, Thailand, the Philippines and other Southeast Asian countries led to a sharp rise in house prices. In 1998, however, property prices crashed, and between 1997 and 2003, residential property prices in Hong Kong fell by 61% and 5%, respectively, as a result of the Asian economic crisis. A decade later, Asian economies stabilised, allowing the real estate market to make progress again.
Driven by low interest rates, confidence in the long-term security of homes and fear of missing out, the surge has put buyers at odds with the government. Authorities in Singapore, a safe haven for investment by wealthy foreigners, have kept a close eye on property prices to ensure housing remains affordable for locals and keeps pace with economic fundamentals. They began advising caution last year and senior minister Tharman Shanmugaratnam warned homeowners in April of the risk of rising interest rates.
Borrowing remained strong in the first half of 2020 and with interest rates expected to remain low, transaction volumes in Singapore are likely to recover during 2021 and we see robust interest from international investors. Singaporeans pay a lower additional stamp duty on residential property purchases than foreigners, depending on the number of properties they own. This month’s entry restrictions on international travellers pose a challenge to foreign investors, especially those with little or no presence in the country.
Although many economists have differing views on the outlook for the global economy, there is a growing consensus that there will be a protracted slowdown and that the recovery will be gradual in the coming months. There is also an industry-wide debate about the long-term impact on office demand of the emergence of a work-from-home culture. While it is too early to draw conclusions on the full impact of this shift, key market and labour fundamentals in Singapore give us confidence that the market will find equilibrium and office space will remain relevant in the medium to long term.
While the long-term outlook for Singapore’s private residential market is positive, prices and housing demand are likely to weaken this year due to protective measures and global economic uncertainty. We expect sales of 13,000 to 14,000 homes this year, with 6,500 to 7,500 new homes for sale. The Singapore property market has recovered in some places as protection measures have eased in the face of pent-up demand.
In general, we see house price growth slowing in the city as we near the end of this long property cycle. Historical data on private real estate and homes shows that sales volumes and prices fall in times of crisis, but demand for sales recovers quickly. Sales volume typically recovers within three to four quarters, and the window of opportunity to buy a property after a price correction is small.
Since the pandemic, we have seen healthy sales of land and private homes throughout the market. We expect housing demand and buying sentiment to pick up in the coming months as optimism grows and the macroeconomic recovery is possible. The property market is poised for a steady recovery and further price growth as our economy recovers later this year.
According to URA, 10,833 unfinished residential units were opened in Singapore in 2020, compared with 11,345 units in 2019, 8,769 units in 2018 and 6,020 units in 2017. Private residential sales slumped 19.1% year-on-year to 144 units
The three most expensive places to buy property are all in Asia, and they held their position as they did last year. Prices rose 3.17% quarter-on-quarter after adjusting for inflation, and 2.76% in the latest quarter.
In the rest of the Central Region (RCR), house prices rose by 4.69% in 2020 (4.64% inflation-adjusted), an improvement on the “growth of 2.8%” in the previous year. In the non-central region (OCR), home prices rose 3.2% last quarter (3.15% adjusted for inflation), following a 4.4% annual increase a year earlier.
