The Effects of COVID -19 Pandemic on Singapore Property Market
The recent Coronavirus or what is known as COVID-19 was an unexpected start of the year of 2020. The overall environment and fear of the unknown has resulted in impacts in the Food and Beverage and Tourism sectors etc.
Perhaps some negative impact, even resulting in early rush to buy some necessities of which has since died down.
Now, what about the early reactions in the real estate market?
The real estate market adjusted itself and started doing stringent checks on buyer walking into the showflats on their temperatures and travel history.
For some tenants they had deferred viewing requests and for some sellers they have also hang up listings for the time being and buyers who are thinks of looking for their purchases to take a wait and see approach
The Market During SARS Back In 2003?
Given the nature of the virus, it is understandable that people will look back in the history of the property market and compare it against the period of SARS. Now let’s look back at some of the statistics to see how the market reacted then perhaps it will give us a better point of discussion.
The first case of SARS was discovered in November 2002, which would be sitting in the 4th quarter of 2002 of which during that during period the property price index was sitting at 82.3.
The World Health Organization (WHO) announced the containment of SARS in July 2003 of which the Singapore property price index was set at 80.7
From a Statistical standpoint, the market took a correct of 1.6 percent. In that sense, the market had took a breather and sellers took time off to see how prices would react in the period of SARS. However, there was somethings that were very different back in year 2003 and 2020. Perhaps it is prudent to look at the circumstances then and now, in the year 2003 what was different?
was that we were coming off a few major events” THE DOTCOM CRASH” in the year 2000.”The 911 US Attacks” in the year 2001
“The US IN IRAQ WAR” that started in the March 2003. All these key events was against the backdrop of the introduction of SARS in the year 2003 as well, given that during this period as well the Singapore’s unemployment rates were close to 5.9%
A lot of businesses were re-adjusting and a lot of businesses were retrenching and a lot of people had a lot of uncertainty in both employment and a lot of uncertainty in terms of their businesses as well
Now fast forward to the year 2020, although COVID -19 or the Coronavirus have kicked off the year in the most unexpected way for the real estate market. What is our current backdrop versus 2003 would be like?
Back in the year 2003 it is actually very different, on the start of 2020 it came off the backdrop of global expansionary mode, whereby most central banks were looking at keeping their rates low to allow for growth in the global economy, and phase one of the US China trade talks, which had dominated the market in terms of the concerns of how the economy would have been impacted if there was an impasse between US and China in terms of their trade talks was actually help with the phase one agreement being signed in January in the World Economic Forum. It was addressed that such the phase one signing between US and China would help with the general economy going towards a positive.
We also did look at the interest rates last year on the second half began on the down trend instead of an uptrend.
In December Bloomberg had gathered a bunch of analysts and all of them in actual fact close to 94% of them had taken a view that much as in December 2020 there would be a presidential election that the economy may go up on the mode whereby FEDS may consider increasing the interest rates, but more than 94% of them feel that the FED rates would remain flat and there would be nothing that would change, meaning that interest rates in the market will relatively low.
As you can see from the chart above, that the Singapore three months SIBOR Rates are very closely correlated with FED rate, which means that, I can make a logical call to say that interest rates are going to remain rather low. Now fourthly and most importantly the Monetary Authority of Singapore (MAS) had done a report in the month of November 2019 in what is called the financial stability review. Ii had done a credit risk profile for the household debts in a year of 2019 and that being said, compared to the year 2017, the general household debts had drop from 54% loan to value to 49% loan to value. In that regard, each individual household has more defensive capability or holding power even in the event of the market coming off, should it come up.
A Past Property Investment Reaps Future Rewards
Now, what does it mean to you then? Is it a good time buy? Well anecdotally, I will share with you something that happened in the year 2003. During the year 2003 one of the iconic projects in Robertson Quay, known as Pier at Robertson was actually launched, Launched prices were in the range of S$900 per square foot to S$1000 per square foot
This was the same environment back then as there was the uncertainty of SARS.
What’s coming off the Dotcom crash, it was coming off the 2001 – 911 US attacks as brought up earlier and even on the backdrop of the US and Iraq war as well, buyers were taken a plunge then and have yet to sell are seeing a very healthy paper gain of close to 100%.given that the transactions in the market are close to S$2000 per square foot and based on the current rental per square foot of about S$5
and also based on a book value they are drawing a yield of close to 6% which isn’t shabby of an investment.
Were the sentiments then as cautious as they are now, in my opinion YES! But on hindsight, it seemed like a smart move… So how is the current market reacting to the COVID 19 pandemic?
I am writing this Blog article on the 21st April 2020. We have come off close to Four months from the start of the year.
Parc Canberra an Executive Condominium as well as The M, which is a condominium were actually launch respectively. We have witness a healthy take out rate of more than 60% and Showflats being lined up with people balloting for units, I believe that the resale market will also take cue from the healthy activity in the primary launches and allow for activities to step up once again with the positive news of slowing new cases of COVID 19 being found and the increase in containment and discharging of patient.
That should increase the activities in the market. So what does it means now?
I really think the demand for Real Estate is still something close to one’s heart. If it a want you can always choose to time your purchases, but if it’s a want and if it is investments related. Then perhaps now is a good time to have a look as well because while others may be more cautious and take a wait and see attitude, You could actually increase your activity and go into the market and have a look and see if there is something that is suitable for your investment needs as well and on the basis of home ownership, no time is a good time
if you are in the process of selling your property or in the process of considering to sell, perhaps now is a good time to go into the market and see what is available in the market as well as a replacement for your current home.
In conclusion, what do you think eventually will happen to the Real Estate market prices at the end of the COVID-19 EPISODE?
Well most things like business will be much back to normal again.
Felix specialises in real estate exclusive listings, digital sales marketing and leases. A trusted consultant to many successful property owners, perhaps the most compelling testament to his success is himself – through strategically analysing the market and well-calculated investments, he already owns local and overseas properties
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