Look Ahead 2021: Defying a pandemic-induced downturn, property market set for more gains

As the world steps tentatively into 2021, TODAY takes a look at what could lie ahead in four areas: The economy, jobs, property and Covid-19 developments. In the final instalment of this series, TODAY senior journalist Wong Pei Ting looks at what’s in store for the property market in the next 12 months.

• The property market is gearing up for a steady recovery as market sentiment is positive, analysts said
• They also expect the en bloc market to heat up again
• One analyst said people will opt for larger flats in consideration for their mental wellness given the ubiquity of remote working

SINGAPORE — Despite Covid-19 roiling the economy in 2020, the year ended on a surprisingly good note for Singapore’s property market as it rebounded strongly after a slow first half of the year and did better than 2019’s results on many fronts.

• Housing and Development Board (HDB) resale prices rose a third consecutive quarter by 2.9 per cent in the fourth quarter of the year — the highest quarterly increase in about 10 years — according to HDB’s flash estimates that were released on Monday (Jan 4)

• The number of HDB flats that were sold for at least S$1 million hit a historic high. According to flash data released by real estate portal SRX on Thursday (Jan 7), there were a total of 82 million-dollar flats in 2020, eclipsing 2018’s record of 71 such deals.

• The number of private home resale transactions hit more than 9,200 units by November, surpassing the overall private home resale deals of 8,949 for the whole of 2019

• Private residential property prices grew by 2.2 per cent for the full year, according to the Urban Redevelopment Authority’s (URA) flash estimates that were released on Monday. This marks the fourth straight year of price increase

Property analysts told TODAY that the property market is gearing up for a steady recovery in 2021 as market sentiment is positive, with many banking their hopes on a successful roll-out of Covid-19 vaccines.

They are even expecting the en bloc market to heat up again, while projecting the price and transaction volume of both private and HDB homes to rise moderately in the year ahead.

Here’s a closer look:

1. Private residential market to remain buoyant

Demand and property prices did not dip as they normally do in a recession this time round as the employment rate was kept high with the Government’s speedy roll-out of supplementary Budgets and economic stimulus, property analysts said.

Noting that the biggest dampener for the property market is a weak job market, Mr Nicholas Mak, head of the research and consultancy department at real estate firm ERA Realty, said: “When people’s job security is threatened, buying property is the last thing on their minds.

“Some of them may also sell their investment properties if they lose their income, resulting in fire sales. Worse, they may have to downgrade their own homes.”

He added that a downward spiral in prices was also avoided this time round as banks went easy on foreclosing on homes where homeowners had defaulted on their payments, so there was no significant batch of properties that were auctioned off at lower prices.

This scenario will continue in 2021, as government support is likely to remain substantial, the analysts said.

“I don’t think the Government is going to pull the rug from under the feet of most workers after such a hard-fought battle to save jobs,” said Mr Mak.

What to expect:

• Prices may go up by 1 to 3 per cent for the whole year, said Mr Lee Sze Teck, director of research at real estate firm Huttons Asia, who believes the extensive activity in the resale market could push private property prices up a little.

• Ms Christine Sun, head of research and consultancy at OrangeTee & Tie, said that the volume of resale homes changing hands could rise moderately by about 5 to 10 per cent, to about 10,000 to 11,000 units in 2021, while new home sales could remain at the same level as 2020’s or dip slightly as fewer launches are expected. Overall private home prices may rise by 1 to 4 per cent this year, she added.

• Noteworthy launches: The new 1,862-unit Normanton Park, a formerly 488-unit development which was sold en bloc for S$830.1 million; Parc Central Residences in Tampines, which will be the first executive condominium launch in the East since 2012; and The Reef at King’s Dock, a waterfront development at Harbourfront.

2. Public housing market to be driven by HDB upgraders

Some 50,000 new flats would have reached their five-year Minimum Occupation Period and become eligible to enter the resale market by the end of 2021.

This prospect has generated greater interest in the market and driven up resale prices in the third quarter of 2020, and the increase in prices will continue into 2021, analysts noted.

Transaction volume will remain strong as the supply of these new resale flats is matching a healthy level of demand that is typical for an economic downturn, where more prudent buyers would turn to buying an HDB flat instead of a more expensive private home, they said.

As the construction period for Build-to-Order (BTO) flats is expected to be delayed due to the Covid-19 outbreak at foreign worker dormitories, homebuyers are also likely to turn to the resale market, further propping up demand, they added.

What to expect:

• Mr Mak said overall resale prices could rise by 3.5 per cent to 6 per cent. This is a moderate rate of growth compared to gains of above 15 per cent when the market is hot, he noted.

• Ms Sun projected that prices will rise between 2 and 5 per cent, and that transaction volume will hit between 24,000 and 26,000 units changing hands, higher than the levels seen since 2018.

• Noteworthy BTO launches include about 160 community care apartments at Bukit Batok, which will be offered as part of the February exercise. The flats, which will feature shared spaces on each floor for residents to meet and make friends, and add-on services such as laundry and meal delivery, will cater to seniors who wish to live independently.

• HDB may announce a new housing model for future BTO flats in prime locations such that they can remain affordable yet guard against a so-called “lottery effect”, where owners sell their homes for far higher prices than the initial purchase price. National Development Minister Desmond Lee had said last month that he will seek public feedback through engagement sessions in the next few months.

3. En bloc fever to pick up again

Analysts said a new en bloc cycle could start in 2021 as developers would have sold out all their units at some developments within a five-year limit. Doing so entitles them to a remission of 25 per cent of the land price which they paid as Additional Buyers’ Stamp Duty (ASBD).

The ABSD regime was introduced as a cooling measure in December 2011 and the last en bloc cycle started in the second quarter of 2016 when the unsold inventory fell to 23,000 units.

The current inventory was 26,483 units as of the third quarter of 2020, having steadily declined from 36,839 in the first quarter of 2019, Urban Redevelopment Authority data showed.

Mr Lee said developers urgently wish to replenish their land banks as the number of unsold uncompleted units is dwindling, as evidenced by a Tanah Merah Kechil Government Land Sale (GLS) site drawing 15 bidders in October.

Such intense participation had not been seen since July 2017, he said.

Mr Lee noted that the GLS offerings for the first half of 2021 are concentrated in Tampines, Lentor and One-north. “Without a good spread of sites across the island, developers will have to turn to the en bloc market to seek choice sites,” he added.

4. Different homes in demand

Mental wellness will feature more prominently as a consideration when people pick their homes in 2021 as the country has adapted to remote working, said Dr Lee Nai Jia, deputy director at the National University of Singapore’s ‎Institute of Real Estate and Urban Studies.

People will be on the lookout for homes with more rooms, as more people living with extended family or parents seek out their own property, after experiencing the stress and tension that could arise in the event of a lockdown, he added.

“The concern is that remote working will continue and that we may revert back to working from home when a similar situation (another circuit breaker) occurs,” Dr Lee said.

Online property portal PropertyGuru also identified this trend in its market outlook report for 2021, saying that buyers will be prioritising larger homes in the suburban districts that are more value-for-money, instead of properties with convenient access to the business districts.

As such, it expects these properties in the rest of the central region and outside the central region to move the fastest, it said.

Mr Colin Tan, director of real estate advisory firm SRE Global, told TODAY that HDB should conduct surveys to understand how people work from home, so that it can assess if the “right size” of a flat should change in the new Covid-19 normal.

“Maybe there will be Covid-22. In preparation, flats should not be that small. Some people find it impossible to work at home with children,” Mr Tan said.