Singapore’s property market performs better than expected as it ushers in 2021

Cooling measures may be implemented if the trend were to continue. Here are 5 things consumers should watch out for.

By Khalil Adis

Kampung Glam in Singapore. Private properties in the Rest of Central Region (RCR) were the best performing sector in the first quarter of 2021. Photo: Khalil Adis Consultancy.

Singapore’s property market continued to defy expectations in both the private and public sectors increasing by 3.0 and 3.3 per cent quarter-on-quarter respectively in the first quarter of 2021, data from the Urban Redevelopment Authority (URA) and Housing & Development Board (HDB) showed.

Private residential prices soared for the third consecutive quarter growth since the third quarter of 2020 to reach 162.2 percentage points, while resale HDB prices have been on the uptrend since the second quarter of 2020 at 142.2 percentage points.

If this trend were to continue, the prices for resale HDB flats may soon hit or surpass the peak that was recorded in the second quarter of 2013.

Meanwhile, in the private property sector, the landed property segment has bucked the trend registering a price increase of 6.7 per cent in the first quarter of 20201 compared with the 1.6 per cent decrease in the previous quarter.

For the non-landed segment, properties that are located in the Rest of Central Region (RCR) took the lead, increasing by 6.1 per cent followed by those that are located in Outside Central Region (OCR) and Core Central Region (CCR) registering a 1.1 per cent and 0.5 per cent increase respectively.

For the rental market, rentals of private residential properties increased by 2.2 per cent in the first quarter of 2021, compared with the 0.1 per cent increase in the previous quarter.

Meanwhile, in the HDB rental market, the number of approved applications to rent out HDB flats rose by 26.0 per cent, from the 8,472 cases recorded in the fourth quarter of 2020 to 10,676 cases in the first quarter of 2021.

The upbeat market has prompted speculations that property cooling measures may be announced this year should prices continue to reach an unsustainable level.

We dissect Singapore’s property market data for the first quarter of 2021 and what they will mean for you as a consumer.

#1: Sellers’ market with potentially high cash-over-valuation in the HDB market

An HDB flat in Punggol. Photo: Khalil Adis Consultancy.

Built-To-Order (BTO) flats now have a waiting period of up to seven years due to construction delays brought upon by Covid-19.

As 80 per cent of Singapore’s population live in HDB flats, the tight supply for new launches will divert potential homebuyers to look for resale HDB flats instead.

This explains why the HDB Resale Price Index (RPI) has been on the uptrend for the fourth consecutive quarter.

Looking ahead, this could drive up the cash-over-valuation (COV) and may see the RPI surpassing the peak that was recorded in the second quarter of 2013.

For prospective home sellers, this could be an opportune time to sell your property.

HDB resale flats from newly MOP-ed (met their 5-year Minimum Occupation Period) such as those in Punggol and Sengkang are expected to see brisk demand.

We are also likely to see potential homebuyers having to shell out more cash for the COV as demand far outstrips supply.

#2: HDB upgraders may want to think twice 

The Quartz, a condominium development in Sengkang. Photo: Khalil Adis Consultancy.

With the buoyant HDB resale market, many might be thinking of cashing out and moving up the property ladder.

​However, this may not necessarily mean it is a good time to upgrade to a private property.

This is because the RPI and the Private Property Index (PPI) have been on the upward trend and are not likely to see their price gap narrowing anytime soon.

HDB’s RPI now stands at 142.2 percentage points while the PPI is at 162.2 percentage points.

With the tight supply for new launches in the BTO and private property markets, the price indexes for both HDB and private resale properties are likely to surge ahead in the next quarter.

So unless you have sufficient cash and/or CPF to finance your next property purchase, it is best to wait out until the new supply for launches come on stream.

For those who will still like to take the plunge, do ensure you do a detailed financial calculation as you will be required to come up with a minimum 5 per cent cash downpayment and another 20 per cent in cash and/or CPF.
You will also need to take into account the Buyer’s Stamp Duty, conveyancing and agent’s fee.

The Buyer’s Stamp Duty will have to paid for in cash first before you can use your CPF Ordinary Account (OA).

Also, for those who are hitting 55-years-old this year, do remember that you will have to set aside a Basic Retirement Sum of $93,000 in your Retirement Account before you can touch the rest of your CPF OA. 

Should the government impose new cooling measures, it may also impact your ability to obtain financing.

Last but not least, when buying a private property, you will be subjected to the Total Debt Service Ratio (TDSR), Valuation Limit and Withdrawal Limit.

#3: Bright spots ahead for private properties located in the RCR and OCR

DUO is a mixed-use development located in the Rest of Central Region (RCR). Photo: Khalil Adis Consultancy.

Why are private properties that are located in the RCR and suburbs (OCR) doing relatively better when compared to those that are in the central region?

This is because the profile of buyers here comprises mainly local and HDB upgraders.

As the pandemic has shown, the local market has remained fairly resilient due to the tight supply excess liquidity and changes in employment policies to encourage local businesses to hire Singaporeans first as part of the post-pandemic economic recovery.

Meanwhile, properties that are located in the central region have been badly affected due to the exodus of expatriates and the Ministry of Manpower’s tightening their criteria when hiring foreign employees.

As such, the pool of potential tenants and prospective homebuyers will likely shift towards the local market.
This is good news for prospective sellers and landlords.

Meanwhile, potential homebuyers will likely see prices for private resale properties increasing at outside the central region and within the suburbs.

However, not all is bad.

Those thinking of snapping up prized properties on Sentosa Cove or Orchard Road may find some good deals in the market.

#4: Tight supply in new launches may favour landlords

An upcoming condominium development in Sengkang. Photo: Khalil Adis Consultancy.

The rental index of private residential properties has been on the uptrend since the fourth quarter of 2021, data from URA showed.

Rentals for private residential properties increased by 2.2 per cent in the first quarter of 2021, compared with the 0.1 per cent increase in the previous quarter.

This may suggest that rent-seekers far outnumber landlords.

As of the end of the first quarter of 2021, there was a total supply of 48,139 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals, compared with the 49,307 units in the previous quarter.
Of this, 21,602 units remained unsold as at the end of the first quarter of 2021, compared with the 24,296 units in the previous quarter.

Rent-seekers who are looking for properties in the RCR and OCR may face stiff competition from both locals and foreign tenants.

Meanwhile, private properties that are located in the central area may likely see their asking price being reduced as this market has been severely impacted by Covid-19.

This is good news for tenants but not for landlords.

#5: HDB landlords may want to revise their rental rate for 2021

An HDB estate in Punggol. Photo: Khalil Adis Consultancy.

Likewise, the HDB rental market has seen a spike in their median rents possibly due to the tight supply of new BTO launches and their relative affordability when compared to the private sector.

According to data from HBD, in the first quarter of 2021, the median rents for HDB flats, in general, have seen an increase across the board when compared to the fourth quarter of last year.

For landlords that are renewing their lease for 2021, this may be a good time to renegotiate your tenancy agreement with your tenants.
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Meanwhile, tenants may have to increase their budget slightly in light of the exuberant rental market.