3 Key Trends that will guide the Singapore Property Market for 2020
Are you planning to sell your home in 2020? Perhaps you are eyeing your next property as we speak? Then you’ll need to know the 3 big trends that will likely guide the property market in 2020, according to PropertyGuru.
Singapore Property Market Key Trend #1 – Buoyant foreign buying to continue
The Singapore luxury property market, which performed well above expectations in 2019, is likely to do the same next year as new launches continue to hit the market.
At the same time, intense competition among developers may curb price increases for higher-end properties.
“We will continue to see an inflow of foreign buyers in the Singapore luxury market. Investors see Singapore as a safe and stable country for wealth preservation via real estate,” said Tan Tee Khoon, Country Manager-Singapore, PropertyGuru. “Compared to the likes of London, Sydney and New York, Singapore is also a relatively cheaper property destination.”
In the ultra-luxury property market (transactions in the price range of S$10 million and above), interest from Chinese national buyers is expected to continue.
Singapore Property Key Trend #2 – New mature estate flats unlikely to dent resale demand
In 2019, the government has expressed clear plans to make Build-to-Order (BTO) public housing more readily available in mature estates, giving first-time home buyers access to more affordable housing options within such estates.
“Consumers who want to live in mature estates are typically limited to buying resale flats from the open market, which usually comes at a higher price point than BTO flats,” said Tee Khoon.
In the next five years, flat buyers can expect the Housing and Development Board (HDB) to launch and build more BTO flats in mature estates. The HDB has already revealed it will build around 5,000 BTO flats in the city-fringe location of Queenstown by 2027 and another 1,500 units in Bishan, an estate located within the RCR, by 2025.
As BTO flats are offered by the HDB at a lower-than-market rate, more BTO launches in mature estates could result in a slight price moderation of resale flats in the same estates. However, PropertyGuru does not expect demand for mature estate resale flats, especially those with good locational attributes, to fall.
Supporting their view is the recently increased grant amount for resale flats, which gives sellers more leverage in their asking prices.
Additionally, the increase in income ceiling for BTO and EC homes will also bring about a new pool of demand. BTO flats in mature estates are likely to be multiple times oversubscribed, funnelling first-time buyers into the resale market.
Singapore Property Market Key Trend #3 – Macroeconomic concerns need to be answered
Despite many positives in the Singapore property market, possible headwinds in the form of muted economic growth and a possible US-China trade war could dampen home buying sentiment. The Monetary Authority of Singapore (MAS) released a report in November 2019 advising home buyers to be more prudent in their purchasing decisions, on the back of an increasing number of unsold units and more new launches slated for 2020.
The MAS report also noted that property prices have moved more in line with economic fundamentals compared with the first half of last year following the additional cooling measures of July 2018. The number of housing loans, which rose in the past two quarters, are in line with the increase in transaction activity, while buyers’ financial leverage remains lower than the period before last year’s cooling measures kicked in.
Of greater concern is affordability of housing beyond HDB flats. “What needs to improve is wage growth, which should ideally keep up with property price increases to remain affordable for aspirational home buyers and facilitate upward mobility of Singaporeans upgrading from HDB flats to condos,” said Tee Khoon.
Low wage growth, coupled with a tight loan-to-value (LTV) ratio, could also impact buyers’ ability to make down payments and reduce affordability overall. However, it is not all gloom and doom. Interest rates are seeing a downward trend and this is likely to continue in the mid- to long- term. This is sure to bring cheer to buyers grappling with issues around affordability. Even current buyers would get an opportunity to evaluate loan refinancing options that will ensure long-term financial sustainability.
In the past three years, while the median psf asking prices of non-landed private property in Singapore increased by 12 percent, gross monthly income from work has only increased by 7 to 8 percent, according to Ministry of Manpower (MOM) statistics. With GDP growth projections subdued for the year ahead and possible headwinds, the affordability gap for private homes could further widen for Singaporeans.