Cooling measures could be introduced in both the HDB and private property markets to ensure prices remain in tandem with wages.
By Khalil Adis
Singapore’s HDB and private property markets have defied expectations amid the pandemic soaring by 5.0 per cent and 2.2 per cent respectively for the whole of 2020, data from HDB and URA showed.
In the HDB market, the Resale Price Index (RPI) for the fourth quarter of 2020 is 138.1 representing an increase of 3.1 per cent over the third quarter.
HDB flats in the resale market saw transactions fall by 1.9 per cent, from 7,787 cases in the third quarter of 2020 to 7,642 cases in the fourth quarter.
However, when compared to the fourth quarter of 2019, the resale transactions in the fourth quarter of this year were 20.6 per cent higher.
For the whole year of 2020, HDB’s data showed that resale transactions increased by 4.4 per cent from 23,714 cases to 24,748 cases.
Meanwhile, the Property Price Index (PPI) for private residential properties increased by 2.1 per cent in the fourth quarter of 2020, compared with the 0.8 per cent increase in the previous quarter.
The resale private property market saw an increase in transactions in the fourth quarter of 2020 with 4,249 homes changing hands compared with the 3,467 units transacted in the previous quarter.
Market exuberance was seen for the whole of 2020, with 10,729 resale transactions compared with the 8,949 resale transactions in 2019.
For the whole of 2020, prices of private residential properties increased by 2.2 per cent, compared with the 2.7 per cent increase in 2019.
Islandwide, for the whole of 2020, non-landed properties proved to be far more resilient increasing by 2.5 per cent while landed properties rose by 1.2 per cent.
Non-landed properties in the prime areas which are defined by the Core Central Region (CCR) were the worst performing for the entire 2020, decreasing by 0.4 per cent followed by those in the Rest of Central Region (RCR) and Outside Central Region (OCR) which increased by 4.7 per cent and 3.2 per cent respectively.
With this in mind, here are the property market outlook and predictions for 2021:
#1: Cooling measures may be introduced
The pandemic has seen both the HDB and private property markets performing better than expected.
If the trend were to continue, property prices could reach an unsustainable level.
As such, the government may introduce a slew of cooling measures to ensure property prices are in line with wages so that buying property remains within reach.
This is especially so for first-time homebuyers.
The cooling measures could include reducing the loan-to-value (LTV) limit, tweaking the Seller’s Stamp Duty and Additional Buyer’s Stamp Duty (ABSD) and revising the Mortgage Servicing Ratio (MSR) and Total Debt Service Ratio (TDSR).
#2: Supply glut in the private property market could soften the resale market
URA’s data showed that as at the end of the fourth quarter of 2020, there was a total supply of 49,307 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals compared with the 50,369 units in the previous quarter.
Of this number, 24,296 units remained unsold as at the end of the fourth quarter, compared with the 26,483 units in the previous quarter.
Such unsold units may result in the softening of the resale market as buyers are spoilt for choice.
Sellers who are desperate to offload their properties may cut prices in a bid to draw buyers.
#3: Buyers’ market especially in the prime areas
In such a scenario, the prime areas located within the CCR as well as in Sentosa Cove will be where the good deals are as these areas are price sensitive and volatile during an economic downturn.
This is already confirmed in URA’s fourth quarter of 2020 data which showed that the CCR was the only region which recorded a 0.4 per cent price decline.
Meanwhile, the suburban areas in the OCR will remain resilient as the homes here are relatively affordable and dominated by local buyers and HDB upgraders.
#4: HDB resale market will remain resilient
Speaking of HDB, the resale market is expected to continue remaining fairly resilient.
This is because HDB flats are seen as an essential need and is home to 80 per cent of the population.
The resale market, particular newly MOP-ed flats (those that have already met the 5-year Minimum Occupation Period), will see strong demand.
Sengkang and Punggol will be among the popular estates for HDB resale transactions.
#5: New BTO launches in mature estates will be oversubscribed
According to HDB, it will offer about 3,700 Build-To-Order (BTO) flats in Bukit Batok, Kallang Whampoa, Tengah and Toa Payoh in its February launch.
This includes the new Community Care Apartments in Bukit Batok.
In May 2021, HDB will offer another 3,800 BTO flats in Bukit Merah, Geylang, Tengah and Woodlands.
The BTO projects in Kallang Whampoa, Toa Payoh, Bukit Merah and Geylang are expected to be eagerly snapped up and oversubscribed as these are mature estates that are located close to the central area.
An independent analysis from yours truly