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Quick takes: What is driving property buying in Singapore?

PROPERTY buying activity in Singapore has been revving up the past few months amid low-interest rates, pent-up demand following the “circuit-breaker” period and a projected rise in HDB upgraders this year.

Urban Redevelopment Authority (URA) figures released on Friday showed that on a preliminary basis, developers sold 10,024 private housing units in 2020, surpassing the 9,912 units in 2019 by 1.1 per cent.

The property sector is also being monitored “very closely” by the Singapore government, which will adjust policies if necessary, said National Development Minister Desmond Lee. This is to maintain a stable and sustainable property market for Singaporeans.

CGS-CIMB is projecting private home prices to rise by between zero and 5 per cent for 2021 and volume demand to remain stable at between 9,000 and 10,000 units. It maintains its “overweight” call on the Singapore property sector, with its preferred picks being CapitaLand, City Developments Limited and UOL Group.

Here are some quick takes on what is driving the momentum for property buying in the Republic:

Low-interest rates, sub-1 per cent mortgages

In November 2020, the market was abuzz about Citibank’s aggressive home loan promotion for affluent clients who take a home loan of at least S$800,000.

The promotional floating rate from Citi is just under 1 per cent. But the talk is that for the well-heeled buyers of landed properties, the home loan rate could fall even lower.

This compares with UOB’s 1.35 per cent and 1.4 per cent for its fixed and floating home loan rates as of Nov 5, 2020.

Pandemic hit different parts of Singapore

A DBS report in October 2020 showed that lower-income earners (S$2,999 and below) made up about 49 per cent of DBS customers who suffered a drop in salary. Within this group, about half saw their income fall by over 50 per cent.

The extent of income deterioration in the food and beverage, hospitality and aviation sectors was even more pronounced than in other industries. In the aviation sector, some 40 per cent of workers’ income declined in March. This doubled to 80 per cent in May.

However, the private residential market has seen a disconnect with the general economic underperformance, given the recent surge in home sales and property prices.

The private home price index rose 0.8 per cent in the third quarter of 2020 over the preceding three months. The index is now up 0.65 per cent from a year ago, according to data released by the URA on Oct 23, 2020.

Anticipated lift in HDB upgraders

OrangeTee & Tie chief executive officer Steven Tan expects a surge in upgraders in the coming years, as more owners of new Housing & Development Board flats complete their minimum occupation period between 2020 and 2023 and will likely move to mature public housing estates or private residential properties, he said.

On the other hand, some owner-occupiers and tenants, including expatriates, are downgrading to smaller and more affordable housing due to employment woes and their industries suffering from Covid-19’s blow.

Foreign buyers make splash in Sentosa Cove

Buying activity in Sentosa Cove’s bungalow market has been getting busier in the past few months on the back of several demand drivers, including buyers from mainland China. List SIR’s analysis of URA Realis caveats database showed that 13 Sentosa bungalows transacted for a total S$195.66 million in 2020, up from just four deals adding up to S$83.39 million in 2019.

En bloc market revival

Market watchers are anticipating a new en bloc cycle to start in 2021, as unsold residential units under development fell in Q3 2020 to 26,600 units, signalling undersupply in the primary market. The start of the previous en bloc cycle was in Q2 2016, when inventory fell to 23,000 units.

A “conservative” and “calibrated” release of residential supply under the first-half 2021 government land sales programme is also likely to drive interest in the en bloc market, property analysts said to The Business Times in December 2020.

Supply will rise by 17.2 per cent for H1 2021, but analysts were mixed on whether or not the increase in housing supply was significant. However, most agreed that the government’s move to raise the number of residential units was in response to healthy demand in the market.

Source: https://www.businesstimes.com.sg/real-estate/quick-takes-what-is-driving-property-buying-in-singapore