Singapore Property In A World Of Economic and Political Uncertainty

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Singapore Property Market Thus Far

While in the thick of the pandemic, Singapore residents were scrambling to buy properties and it still holds true up to today as supply of completed properties can’t keep up with demand. Rentals have also rocketed after Singapore started to ease border restrictions and owners would rather collect the high rentals than divest their properties. It is also an opportune time for those who had difficulties selling their properties in the past (ie: low floor units, not ideal facing, older properties); many buyers just want to secure their own space as the hybrid working model looks to be the norm in the future and to be ready in case there is another wave of covid outbreak.

Current Global Events

The Ukraine-Russia conflict has exacerbated supply constraints to a point that it will get worse before it improves. There are shortages in essential items such as wheat, cooking oil, fertilizers and oil, which effects have cascaded down to consumers globally. Fuel prices have hit record high and will persist as long as the war drags on, some producer countries have banned exports of certain food supplies with inflation rising at a record pace.

The annual inflation rate for the United States hit is 8.6% for the 12 months ended May 2022, the largest annual increase since December 1981 and after rising 8.3% previously, according to the US Labor Department data published June 10. As the Fed has already signalled it will hike interest rates to combat inflation, capital outflows from the stock market and cryptocurrency have continued to dominate news headlines with announced staff cuts across the tech industry.

Will There Be An Impact On The Singapore Property Market?

In December 2021, Singapore announced tighter cooling measures for the property market as it prepares to open up the borders for international travel. The current ABSD rate for foreigners stands at a hefty 30%. Many market watchers thought buyers would take a wait and see approach but no, the property market continues to roll on even as the government tries to absorb demand with bumped up releases of HDB BTOs and government land sales. 

Recent News Headlines

May 09 – It was reported that Piccadilly Grand sold 77% of units (315 out of 407 units) on launch weekend at an average selling price of $2,150psf. 

May 23 – Liv @ MB was 75% sold on launch weekend at an average selling price of $2,387psf.

June 03 – Chinese national buys 20 units at Canninghill Piers for S$85 million and is considering a further 10 units.

June 10 – HDB Resale Prices up for 23rd consecutive month in May as million dollar flats were transacted for the first time in Woodlands and Pasir Ris. 

June 11 – Indonesian family in exclusive due diligence to purchase 22 units at Draycott Eight in a deal close to S$168 million working out to slightly below $2,570psf.

June 14 – A Singapore permanent resident of Chinese descent purchased an entire floor in Suntec City Tower 2 for S$38.8 million.

With Singaporeans snapping up new launch private homes at record prices, foreigners are equally undeterred by the cooling measures choosing to make large quantum purchases in Singapore prime real estate. In a world mired with uncertainty in geopolitical and economic issues, Asian investors have seemingly identified a safe haven to park their funds in. These investors didn’t buy the properties on the cheap but instead at the peak of the current market cycle. 

Obviously with the S&P 500 closing in on bear territory at time of writing, fortunes are erased from the stock and crypto markets alike. The US Federal Reserve has raised interest rates by 75 bps and has warned of a further 50 bps increase in July. Anytime can happen as start-ups backed by venture capital feel the ripple effects with prominent tech firms such as Shopee and Tesla announcing job cuts. 

Singapore has an arsenal of ammunition to fire up the property market if required, but it may not be necessary for the time being as demand continues to outstrip supply. Although this small nation is not immune to a global recession, we take comfort that our strong fundamentals will help to cushion the impact on our economy and job market. The price growth has been in line with the overall job stability and income growth of the population. Further mortgage lending has been tightened and sellers stamp duty was introduced since the last GFC to curb speculation in the property market. The mass market segment is expected to remain resilient and the upcoming new launches in the OCR segment will test buyers’ appetite and acceptance of the new psf high.

Will Demand Evaporate Overnight?

It is not likely to happen as one of the Government’s policies is to ensure that property prices do not outpace income growth so as to ensure financial stability. Our mortgage interest rates range from 1.20% to 2.50%, which is relatively low compared to what borrowers are paying in the US, Australia and UK. Our property prices are also reined in by the cooling measures to prevent housing bubbles. We may see pockets of distressed assets being put up for sale as certain industries may be more adversely impacted but it will not be a systemic event. In a small island nation where a certificate of entitlement to own a car costs $100K and housing rentals are at an all time high, the middle and higher income groups are sufficiently buffered to ride through the crisis and we trust the Government will do its best to have Singapore emerge stronger from the global crisis. 

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