The COVID-19 pandemic has brought the world to a standstill, almost. Airlines have to ground their fleet, restaurants forced to shut as dine-in ceased, foot traffic at retail stores vanished and the list goes on. The economy is reliant on so many moving parts that if one jams, the machine encounters a problem and this crisis is possibly the most serious in modern times yet.
Locally, our government has oiled the machine with almost $100 billion to get it chugging as usual. Whether it can revert back to normal or a major overhaul is required, I think we can only know next year as a $100 billion and a deferment of housing loan repayments for 6 months appear sufficient to stave off any major breakdown for the time being.
CONDO
The implementation of the Circuit Breaker (CB) for almost 2 months has affected residential market launch activity in the second quarter of 2020. Taking into account the absence of major new launches and CB measures, 1,713 new private homes were sold in 2Q20, 20.3% lower q-o-q and 27.1% lesser y-o-y. New homes sales slowed down in April and May but posted a significant rebound in June due to the easing of CB measures and reopening of showflats from 19 June.
In the secondary market, more private non-landed homes were resold last month compared with May, while prices held for a third consecutive month as Singapore gradually reopened its economy after a two-month circuit breaker, according to flash data released yesterday.
The number of condominiums and private apartments resold increased to an estimated 497 units last month, a 174.6 per cent increase from the 181 units moved in May, the flash figures from real estate portal SRX Property showed.
Still, last month’s resale volume was 26.3 per cent less than in the same month last year and 40.7 per cent lower than the five-year average volume for the month. The recovery was within expectations as physical viewings resumed and buyers were able to shortlist their choice units during the CB from virtual viewings.
HDB
The SRX flash estimate for the Housing Board resale market reflected a similar rebound, where close to seven times more flats were sold last month compared with May. The large number of HDB resale flats that will enter the market could drive demand from first time buyers and from those looking to upgrade as work from home turns into a norm. An estimated 26,000 new HDB flats would reach the end of their five-year minimum occupation period in 2020. To avoid paying additional buyer’s stamp duty, owners upgrading from their HDB would need to buy a completed resale condo for their own use after selling their HDB flats. Hence it is possible for transactions of resale condominiums to rise in the coming months.
RENTAL
In 2Q20, net absorption of private residential properties turned negative for the first time in almost 13 years. It could be indicative of weaker leasing demand due to deterioration in business conditions affecting the employment and wages of expats. In mitigation, low completion levels coupled with some withdrawals have also resulted in negative net new supply, keeping vacancy rate unchanged at 5.4% in 2Q20.
Rents are expected to continue facing downward pressure in the coming quarters, as leasing demand is likely to weaken given the ongoing economic slowdown and border control measures drying up the pool of limited tenants in the market, despite low vacancies.
References: JLL, The Straits Times