'Good time' to enter the market? Private home sales in September hit highest monthly sales since July 2018

• Property developers sold 1,329 private residences in September, hitting a high in more than two years
• Sale numbers have continued to climb for five straight months since June
• A key factor is because not all households are feeling the full brunt of the economic fallout
• The “pent-up” and “exuberant” demand is still widely thought to be the main reason behind the recent boom

SINGAPORE — Private home sales reached new heights in September following months of brisk sales ever since stay-home curbs ended in June, hitting a peak not seen since more than two years ago.

Data from the Urban Redevelopment Authority (URA) released on Thursday (Oct 15) showed that developers sold 1,329 private residences, excluding executive condominiums, in September, which was a 4.6 per cent increase from the same month last year, and 5.6 per cent more than last month’s sales.

This is the highest monthly sales since the 1,724 units sold in July 2018, which was attributed to a buyers’ frenzy that occurred a day before new property cooling measures kicked in then.

In September, the top five projects are: 

• Penrose (Geylang) sold 389 units at a median price of S$1,541 per square foot (psf)

• Treasure at Tampines sold 115 units at a median price of S$1,379 psf

• JadeScape (Marymount) sold 62 units at a median price of S$1,774 psf

• The Garden Residences (Serangoon) sold 59 units at a median price of S$1,606 psf

• The Woodleigh Residences (Bidadari) sold 57 units at a median price of S$1,926 psf

WHY IT MATTERS

The upbeat September sales data is no anomaly — numbers have continued to rise for five straight months since the end of the two-month circuit breaker that restricted activities due to Covid-19.

It also means that private home sales in the first three quarters of this year was 0.8 per cent more than the same period last year.

This is in spite of the ongoing Covid-19 pandemic and worsening economic conditions — Singapore is heading for its deepest recession on record, with unemployment expected to climb further as businesses struggle to cope amid the crisis.

At the same time, the resale of Housing and Development Board (HDB) flats and condominium units have been buoyant, both in terms of overall prices and sales volume. 

Real estate portal SRX reported that condo resale volume last month was 62.8 per cent higher than the same month in 2019, and 64.5 per cent higher than the five-year average for the month of September.

Singaporeans are responsible for the bulk of non-landed new private home purchases with 1,070 transactions in September, which is 87.4 per cent of the 1,224 new non-landed home sales.

These trends imply that there is much movement in the property markets stemming from people who are switching from public to private housing as well as private property investors, among others.

WHY THIS IS HAPPENING

A key factor why the ongoing economic recession has little bearing on private home sales is because the recession does not have a broad-based impact — the pandemic has affected many Singapore households, but not all are feeling the brunt of the economic fallout.

Instead, it is the “pent-up” and “exuberant” demand following the circuit breaker that is widely thought to be the main reason behind the recent boom, several analysts said.

The market is likely to also be encouraged by the past few months of price recovery and sales, which gave buyers confidence to proceed with their purchases, they added.

However, there are also other reasons to explain the behaviour, which raises questions about how sustainable these trends are in the longer-term:

• Interest rates are at a prolonged low because governments are dealing with the economic fallout from the pandemic, which spurred homebuyers to borrow more to purchase property

• Buyers are jumping in because there is expectation that Singapore is well-positioned for a global recovery, which would cause property prices to rise if it happens

• Considering how financial markets have tanked due to the pandemic, investors see property as a better value for their capital 

• High-net-worth individuals are also putting their money into property so as to ride a wave of market recovery

• Not all livelihoods have been adversely affected by the pandemic at the moment

WHAT INSIDERS ARE SAYING

Mr Ismail Gafoor, chief executive officer of property agency PropNex, said: “New home sales, backed by robust demand, have outperformed expectations time and again in recent months… There remains a sizable pool of genuine buyers, HDB upgraders, and investors with ready funds to enter the market to take advantage of the more attractive pricing amid the challenging economic conditions.”

His agency’s head of research and content, Ms Wong Siew Ying, said: “Buyers right now probably have a greater visibility of the potential challenges and opportunities ahead, and are in a better position to make a buying decision.”

Mr Lee Sze Teck, director of research at real estate firm Huttons Asia, said: “While Singapore is headed for its biggest recession on record, the contraction is not broad-based and in part due to the two-month circuit breaker.”

Since June, Singapore’s manufacturing and export sectors have shown early signs of recovery. Properties are thus seen as one of the investment assets that will benefit from economic recovery, Mr Lee said.

Ms Christine Sun, head of research and consultancy at property company OrangeTee & Tie, said: “Singapore properties are still hot during this pandemic.

“(Buyers) may feel that it is a good time to enter the market now since prices will likely rise after the pandemic and Singapore's economy is positioned for a gradual recovery with many sectors being reopened in recent months.”

Mr Leonard Tay, head of research at Knight Frank Singapore, said that 2020 could end with about 8,000 to 9,000 of new private home sales, beating his real estate consultancy’s own expectations.

The upbeat trend may not last for the last quarter of this year though, Mr Tay said. ”Even though new sales volume in the private residential market has been buoyant in the few months after the circuit breaker, sales momentum for the rest of 2020 might start to ease off, as pent-up demand dissipates.”

WHAT TO EXPECT

September’s surge follows a new directive by URA at the end of last month to restrict the reissuance of the option to purchase (OTP) by developers, which is seen to have a cooling effect on the market.

This could have an impact on sales for the rest of the year, analysts said.

Mr Lee of Huttons Asia said: “There will be an initial knee-jerk reaction to the new policy by the Controller of Housing on the reissue of options. This will take the wind out of the sails in the short term, but we believe the aim is to ensure a stable and sustainable market, which is beneficial to the industry in the long term.”

Ms Sun of OrangeTee & Tie noted that the stocks of past mega projects that were launched before Covid-19 hit have come down quickly, and have sold more than half of the units launched.

The 21 mega projects tracked by her company saw their available stock fall from 9,460 units in December 2019 to 5,460 units in September 2020.

“Given the steady pace of sales, most mega-projects could be fully sold by next year,” she said.

Another factor to watch is how the United State’s Federal Reserve acts during the pandemic. It had previously signalled its intention to keep interest rates near zero to support the US economy.

The Singapore Interbank Offered Rate (Sibor), to which many home loan rates are pegged, is highly influenced by the Fed’s hikes and cuts.

Ms Wong of PropNex said: “We can expect the ‘lower for longer’ interest rates to continue to support housing demand (in Singapore).”