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Sales of private properties fall by 12.5% in Q1 from last quarter, analysts expect further decline

SINGAPORE — The overall sales volume of private properties in Singapore went down by 12.5 per cent in the first three months of the year compared to the last three months of 2019, as Covid-19 takes its toll on the property market.

Prices and sales of private homes are expected to slide further in the second quarter of 2020 with the pandemic expected to wear down the market even more, property analysts said.

Prices and sales of private homes are expected to slide further in the second quarter of 2020 with the pandemic expected to wear down the market even more, property analysts said.

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SINGAPORE — The overall sales volume of private properties in Singapore went down by 12.5 per cent in the first three months of the year compared to the last three months of 2019, as Covid-19 takes its toll on the property market.

On Friday (April 24), data for the first quarter of the year released by the Urban Redevelopment Authority (URA) showed that 4,269 private housing units were sold in the first quarter — lower than the 4,878 in the quarter before.

However, the number was still higher than the 3,743 in the first quarter of 2019 when doing a quarter-on-quarter comparison.

Analysts told TODAY that sales were low at the start of last year because less than six months before that, in July 2018, the Government’s measures to cool down the property market took effect.

The latest data from URA also showed that the prices of private homes dropped by 1 per cent when compared with the last quarter of 2019, but quarter-on-quarter, prices are still higher than the first quarter of last year by 2.4 per cent.

WHAT TO EXPECT FROM APRIL TO JUNE

Prices and sales of private homes are expected to slide further in the second quarter of this year with the pandemic expected to wear down the market even more. The Government extended the circuit breaker period, which started on April 7, to June 1 this week.

Mr Nicholas Mak, head of the research and consultancy  department at real estate firm ERA Realty, said: “Almost two-thirds of the potential housing transaction volume in the second quarter of this year can be written off due to the circuit breaker.

“Even after these measures are lifted, the spread between the bids of property buyers and sellers’ offers would widen due to the expected economic impact of Covid-19, resulting in fewer transactions in the months that follow.”

Ms Christine Li, the head of research at property company Cushman & Wakefield, agreed that sale volumes are expected to plunge in the second quarter of the year as show galleries remain closed during the circuit breaker.

“The second quarter won’t see zero sales because some of the transactions had been pre-negotiated earlier and paper work could still be carried out virtually, but we do expect total volumes from April to June to come down quite substantially by about 50 to 70 per cent,” she said.

Independent property analyst Ong Kah Seng predicted that overall private home prices can fall by about 2 per cent in the second quarter compared with the first. He is hopeful that June or July can potentially emerge as “vibrant” months for property sales.

“Buyers with ready financing would have spent April and May considering their best options and will proceed with getting their dream property from developers who will offer properties at attractive prices once the measures are lifted,” he said.

"Attractive pricing can certainly prevent buyers from walking away when the circuit breaker is over. Generally, giving a 2 or 3 per cent price discount for the units should encourage buyers to purchase on the spot,” he added.

WHAT TO EXPECT FROM JULY TO SEPT

Even if there is a slight pick-up in sales that might occur due to lower prices after the circuit breaker, Mr Mak of ERA Realty said that with fewer property launches overall this year, the primary market sales for private homes will still be on a decline.

“For the whole of this year, developers’ sales could vary. We are looking at between 6,000 and 8,000 private housing units — lower than the 9,912 units sold last year,” he said.

“Property prices are also projected to take a hit, not due to the circuit breaker period, but due to the expected economic slowdown. The private housing price index could contract by 3 to 6 per cent for the whole of 2020,” he added.

Ms Li from Cushman & Wakefield is expecting weak demand to persist in the housing market in the third quarter and beyond. This is because in a typical recession, buyers’ confidence levels drop and they are increasingly worried about committing to big-ticket items such as housing, she said.

“People tend to hold back as they are not sure if they will continue to hold on to their jobs. Outlook for the market is also dimmer, so even investors with deep pockets will not be convinced to make the move yet, because there will be more downside in the coming quarters.”

However, Ms Li is confident that relief measures such as deferments on mortgage repayment introduced by the Government will help to cushion the price decline, resulting in a less severe drop for the year, compared with previous slumps such as the global financial crisis in 2008.

“The law to allow temporary relief from contractual obligations will allow homeowners to defer their mortgage payments for six months with a possibility of extension to 12 months. This allows sellers to increase their holding power and stick to their asking prices while letting homeowners buy time if their ability to service the loans has been negatively impacted,” she said.

Ms Christine Sun, head of research and consultancy at property firm Orange Tee, said that it was a good move to have “many property measures” put in place over the past years to ensure financial prudence.

These measures will reduce the occasions for homeowners to slash selling prices or default on housing loans.

“Therefore we may not see many 'fire sales' that could potentially cause prices to fall sharply,” Ms Sun said. A fire sale happens when a seller or developer is very eager to look for a buyer and is willing to close the deal at an attractive price below valuation. In the event that many fire sales happen, property prices will drop.

Ms Sun said: “The Government has also released an unprecedented amount of stimulus to help the economy and ensure unemployment remains low. As long as people remain employed and businesses continue to run, market sentiment may not be worse than past crises.”

TRANSACTIONS FOR HDB HOMES

For Housing and Development Board (HDB) flats, resale transactions fell by 7 per cent, from 6,339 in the last quarter of 2019 to 5,893 in the first quarter of this year.

Ms Sun from OrangeTee said that this trend is expected to continue with house viewings being discontinued as part of the containment measures and buying sentiment being weak in light of the economic uncertainties.

“The number of resale transactions could be slightly lower than last year. We estimate that around 21,000 to 22,000 public housing units could be sold this year.

“Overall prices of resale flats may enter the negative territory should the health crisis persist and unemployment creeps up,” she said.

Mr Mak of ERA Realty also predicted that the HDB resale volume in the second quarter could drop to less than half of the volume in the first quarter, and the resale price index could drop by 0.8 per cent to 2 per cent for the whole of this year.

However, it could bounce back once the circuit breaker period is lifted, he said.

“As HDB flats are the most affordable housing in Singapore, during periods of economic uncertainty, some homebuyers would prefer to go for public housing. Therefore, the decline in HDB resale transaction volume is expected to be less severe than that in the private housing market,” he said.

Ms Sun agreed that the affordability of HDB flats could be deemed as attractive to some buyers, especially those who prefer a cheaper housing option or a smaller housing loan in uncertain times, she said.

“Property values may hold steady for areas of higher demand such as those located near MRT stations, amenities or city centre,” she added.

Related topics

private property HDB sales Covid-19 coronavirus circuit breaker

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