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Why Singapore’s Residential Market Remains Resilient Amid Crisis?

Why Singapore's Residential Market Remains Resilient Amid Crisis?

Singapore property market has been long popular as a dream investment destination for having a strong strategic position globally and high standard of living.

Being supported by conducive political atmosphere and strong governance, over the past few years Singapore has enjoyed a massive growth in foreign investment especially the real estate market.

Sir James Dyson is one of the most high profile investor who bought the Wallich Residence super penthouse for S$73.8 million and a Good Class Bungalow on Cluny Road for S$41 million.

Why Singapore's property market is resilient
James Dyson's super penthouse at the Wallich Residence
IMG_2987
James Dyson's Good Class Bungalow on Cluny Road

Chinese billionaire Jack Ma of Alibaba and Facebook’s co-founder Eduardo Saverin are another two names among the few big shots who had entered Singapore property market earlier bringing an estimated total investment of S$270 million.

With the COVID-19 pandemic wave hitting our shore, local property buyers are getting more concerned about purchasing during a crisis.  They mainly fear of losing their investments as it could be unprofitable in the future.

The impact of corona virus is also leaving another question among property investors.  Will Singapore continue to be a top investment destination?  Will foreign buyers still be interested in investing their funds in Singapore property?

Singapore has been famous for being a safe haven to park foreign funds especially in times of uncertainties.

Based on the data from Urban Redevelopment Authority (URA), after rising for three consecutive quarters, private homes’ overall price index has slipped 1.0 per cent quarter-on-quarter in the first quarter of 2020.

In the beginning of the Asian Financial Crisis (AFC) in 1996, we saw a decline of 1.9 per cent in the first quarter, while during the Global Financial Crisis (GFC) in 2008, an initial drop of 2.4 per cent was recorded.  As such, the current decline is not so severe compared to the past two crises.

why Singapore's property market is resilient

As for how much property prices will drop further will much depend on the pandemic’s duration, as well as the unemployment rate and home owner’s financial stability.

What Makes Singapore Property Remains Appealing Even in a Storm?

Singapore has long been making a living by connecting herself with the world and today, this ‘Red Dot’ nation is well-known to be a trading, finance, telecommunications, aviation and seaport hub in Asia-Pacific region.

Having economic strengths and trusted international reputation built up over many decades, Singapore government has always understood what is at stake when crisis hits.  The government has a proven track record to be the one ahead preparing plans and programmes to cope with the challenges and uncertainties to ensure that businesses are able to continue operating even in a crisis.

In times of trouble across the globe, investors will value the assurance of a government that plays by the rules. 

I always believe that it takes two hands to clap to make things happen or for an event to take place.  For this reason, I am trying to analyze this fact from two different angles.

They are:

  1. Internal Factor
  2. External Factor

Let’s get started.

Internal Factor

  • Singapore has the basic fundamentals that have attracted foreign investors for many years, such as:
  1. Safety, low crime statistics.
  2. Political stability, making investments safe from geopolitical and economic issues.
  3. Currency strength due to stable financial system and sound fiscal policy.
  4. Sound legal and simple tax system.
  5. Transparency.
  6. Ranked no. 2 in the world for the ease of doing business.
  7. Modern and high-tech infrastructures.

Having a world class government caused Singapore to gain significant trust not only from its own citizen but foreign investors as well.  The Global Financial Centres Index (GFCI) in its 27th edition has ranked Singapore the fifth most competitive financial centre in the world, trailing New York, London, Tokyo, and Shanghai.

why Singapore's property market is resilient
why Singapore's property market is resilient

With this status within South-East Asia and remains the region’s only major financial centre, Singapore has the inherent advantages to continually attract property investors into the country.

Furthermore thanks to these strong fundamentals, Singapore recently recorded a multi-million dollar deals with a group of foreign investors, where some of them were closed only through photos and virtual viewings when a partial lockdown remains in place.

There was even a transaction of S$20 million at Marina One Residences, a five-minute walk development to the iconic Marina Bay Sands hotel and casino, without any virtual tours.

  • Singapore has the track record of having its private property market regularly recovers after every economic crisis.

According to Christine Sun, Head of Research and Consultancy at OrangeTee & Tie, within the past crises she noted that Singapore’s GDP growth often recovered after just 3 or 4 quarters of negative growth.  Historical data has shown that Singapore private residential property usually would see a fast rebound after each depression.

why Singapore's property market is resilient

Though there is no guarantee that Singapore economy will perform in the same manner in current crisis, she is optimistic that the effects of this pandemic could be lessen by the S$50 billion stimulus released by the government.

With that being said, she is fully aware that every crisis is different and nobody can be sure of what will happen after the pandemic.  Nevertheless we can take reference from what had happened in the past for some references of what to expect from the property market.

  • Singapore private property market has generally yielded positive capital appreciation over the past 30 years.

The URA’s price index has shown that the prices of properties have risen across all market segments (Luxury segment / CCR, Mid-tier segment / RCR and Mass-market segment / OCR) and pull through the toughest crises such as SARS, the Asian Financial Crisis and the Global Financial Crisis.

Singapore property market trend is always up

External Factor

The rush of foreign buyers mainly from China and Hong Kong into real estate has given some support for Asian property markets which have been hit by the COVID-19 pandemic.  Singapore as one of their familiar hunting grounds in Asia has been in the spotlight due to the political turmoil in Hong Kong. 

  • Wealthy Chinese investors are hunting for luxury housing.

To guard their wealth against anticipated inflation and the further devaluation of yuan, these rich buyers are turning to luxury homes with Singapore as one of their favourite property investment destinations.

China economy has been weakened due to the US-China trade war, alerting their investors to divert their funds to other countries and choosing property as the best investment alternative to hedge against the inflation.

They have the confidence that their property investment in Singapore will continue to hold value in the long run, as such they are able to preserve their wealth and enjoy a return on their investment in the long term.

These buyers tend to be high net worth profiles who could afford to invest at least S$3 million in the city-state.

Over the past 2 years, Chinese buyers have been the biggest foreign buyer group with 2,637 or 7.3 per cent non-landed private home purchases, followed by Malaysians at 4.3 per cent, Indians at 1.9 per cent and Indonesians at 1.6 per cent.

foreigners buying Singapore property
  • The National Security Law from Beijing and pro-democracy protests in Hong Kong have caused many rich Chinese to turn to Singapore.

Media reports in Hong Kong prompted that the wealthy Chinese in the city may divert their funds to Singapore if the National Security Law would open the way for mainland authorities to track their money.  These developments have prompted Hong Kong residents to relocate or invest in Singapore property. 

A number of migration and property consultants in Hong Kong said that the inquiries among Hongkongers who were looking to relocate since Beijing’s announcement had increased by five-fold, making about 100 inquiries per day.

According to one of the consultants, approximately 10-15 per cent of inquiries usually led to an actual move.

They belong to high-earning professionals and upper-middle wealth group looking at moving into Singapore for the long haul, viewing Singapore as a safe haven because of its stability and a more regulated market compared to Hong Kong itself.

Those asking about Singapore are mostly families with young children and they are looking for Asian English-speaking countries to settle down.  Singapore and Hong Kong are considered to have a similarity for being much more international and well-known in making life easier for expats.

Currently the numbers of Singaporeans living and working in Hong Kong are estimated to be around 15,000, and some of them are also interested in moving back home due to security and safety issues.

What Will Happen to HDB Resale Market and Prices?
HDB market and price

HDB resale prices will not correct excessively in the coming months even though housing demand may soften if the pandemic leads to a longer crisis.  The reason is people are buying HDB flats for their own stay, not for speculation.

On a side note, government has introduced various policies changes last year to improve housing affordability.  These changes were effective in boosting the housing market last year.  They are enhanced CPF Housing Grant, increased income ceiling as well as larger home loans for eligible buyers.

Moreover, genuine buyers with urgent housing needs will be the first to return to the market when safe distancing measures are eased.

Conclusion

In my opinion, both internal and external factors have strongly complemented each other and successfully supported Singapore property market to be resilient through many crises. 

Singapore’s robust regulatory system has been continually making the investment climate attractive especially when the world is facing economical and political instability.

With all this in the background, the demand and prices in Singapore property market can be more stable and it will not be so easy to expect a market crash.

Studies on analysing the profitability of private property over the years also revealed that those who bought new private homes during a downturn and resold them thereafter have made handsome profits.

Singapore property market amid crisis
Mass Market Homes
Mid-Tier Homes

For instance, home buyers during the Global Financial Crisis in 2008 had made the highest profits over the last 17 years compared to other buyers who bought properties during other periods of time.

Buying activities in Singapore real estate market may rebound in some locations when circuit breaker measures ease, followed by the return of foreign buyers once travel restrictions are lifted.

Despite the positive long-term outlook for Singapore private residential market, this year we might see some weakness in home demand and prices as a result of circuit breaker measures and global economic uncertainties.

Should the pandemic drags longer, private home prices may fall up to 5 per cent.  OrangeTee Research and Consultancy has projected that in year 2020, overall private home sales would be around 13,000 to 14,000, of which 6,500 to 7,500 are new home sales.

Singapore property market projection 2020

Thinking of ‘Property Wealth Planning’ or Considering to ‘Upgrade’ Your Property?

Drop me a message for a non-obligatory property consultation if you still have questions or doubts.  I am here to help you exploring your best potentials and options, be it for your own stay or investment.

ABOUT ME

Lina Halim is on a mission to assist you in reaching your real estate goals.

As a Senior Associate Director with OrangeTee & Tie Pte Ltd, she takes the time to listen and understand your unique needs, only to plan and tailor a custom strategy that will help you acquire the specific property assets.

Never a fan of high pressure tactics, Lina centres her business on being committed, sincere and genuine with her clients.

She uses her real estate experience and property market knowledge to scope out only the most fitting opportunities for her clients.

Be it a need to get the right buyer or seller, she always put the client’s interest and ultimate goals as her priority.

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