By Chong Qi Hui, Head of Research
Date: 3 Oct 2020
Singapore residential prices being recession-proof?
Despite experiencing one of the worst recessions, prices of Housing and Development Board (HDB) resale flats rose 2.1%, while the overall price index for private residential properties rose by 0.8% in the third quarter.
While I have analysed back in June this year that we will not see a massive correction on property prices like during the Global Financial Crisis back in 2008, the stronger-than-expected resilience in property prices coupled with an 11-month high in home sales in August, defined the odds under the backdrop of Singapore’s worst downturn and surge in job losses.
There are several reasons:
1. The existing cooling measures ensure financial prudency among property owners. For example, the Addition Buyer’s Stamp Duty (ABSD) discourages short-term investors who are likely to be speculators but is tolerable for homeowners or long-term investors.
In addition, the Total Debt Servicing Ratio (TDSR) ensures that people are not over-stretched and are able to pay their mortgages, hence they are not forced to sell at excessively low prices.
2. The Government introduces additional measures to support the property market, such as loan deferments for home buyers and waiving the charges for developers applying to extend completion deadlines.
3. HDB market will generally remain resilient as it is a fundamental housing need and will divert the demand from private homes to HDB resale flats during economic uncertainties.
In addition, the expected delay in Build-to-Order (BTO) projects due to the construction suspension in April and May will drive up demand for HDB resale flats, hence we have seen prices experiencing their fifth straight quarterly gain in the price index.
Be headful my friends as we are unlikely to see a price correction in Singapore residential property market this year!
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