According to the Developers Sales Survey by the Urban Redevelopment Authority, private home sales in May 2020 saw a huge uplift from April’s numbers. Here’s an overview of the data:
1. Over 70% increase in private home transactions
For private home sales, there was a 75.5% increase from the previous month (486 sales in May compared to 277 in April). If you include executive condominiums (ECs), there were 509 new homes sold in May, which is 73.7% more than the 293 units in April.
2. More affordable private homes were sold
Of the private properties sold, over 90% were outside central region (OCR) and rest of central region (RCR). There were 256 OCR and 189 RCR sales in May, as opposed to 98 and 77 respectively in April.
This shouldn’t come as that much of a surprise as there were no core central region (CCR) launches in May. For the CCR, there were only 41 sales in May, versus 102 in April.
Top 5 private condos sold in May 2020
If you’re curious which developments were the ones selling like hotcakes:
Source: URA, Huttons Research
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So what is fueling this property market rebound?
In terms of COVID-19 and the circuit breaker rules, not much changed from April to May. So what caused the uplift?
1. More investors interested in small private home units
It seems that in addition to locals shopping for new homes, property investors also helped to drive May’s sales.
"There seem to be more investors entering the market as sales of smaller or lower-priced units soared last month. These private homes tend to be more popular among investors given their affordability and attractive investment yield," says Christine Sun from OrangeTee & Tie.
In May 2020, the number of sales for smaller units below 800 sq ft rose by a whopping 70%. Of the total private home sales, the proportion of those which are under $1 million also rose from 23.6% in April to 28.7% in May. This is the highest proportion recorded since 29.6% in August 2019.
Mr Desmond Sim (沈振伦), Head of Research, Southeast Asia, CBRE adds, "Uncertainties and fluctuation in the equities and bond markets may have also motivated some buyers to look back into residential properties, which have long been regarded as a safer haven."
2. Thanks to developer discounts and incentives, properties were cheaper
If you compare prices between May and April, you’ll find that they’re about the same:
CCR
$2,336 psf
$2,446 psf
$2,442 psf
RCR
$1,812 psf
$1,792 psf
$1,810 psf
OCR
$1,427 psf
$1,454 psf
$1,485 psf
Source: URA Realis caveats, Huttons Research.
Please note that the projects in the CCR basket for 7 to 30 Apr and 1 to 31 May are adjusted to exclude Boulevard 88 which belongs to the ultra-luxury segment and can skew the prices.
Please note that the projects in the CCR basket for 7 to 30 Apr and 1 to 31 May are adjusted to exclude Boulevard 88 which belongs to the ultra-luxury segment and can skew the prices.
However, if you rewind further, the median prices have actually fallen by 15.3% from S$1.43 million from the start of 2020 to S$1.21 million in May 2020. In the recent months, there have been many reports of fire sales and aggressive discounts to help drive property sales.
"Anecdotal evidence have also pointed to some developer discounts and incentives which may have helped to give buyers the final push, particularly for those who have been waiting on the side-lines, possibly from end of last year," says Mr Sim.
3. SIBOR continued downwards, making home loans more affordable
Another thing that may have encouraged buyers to transact is the current low-interest environment for home loans.
The Singapore Interbank Offered Rates (SIBOR) have been trending downwards since the coronavirus outbreak and such, SIBOR-pegged floating interest rates are the lowest they’ve been in years.
As Monetary Authority of Singapore (MAS) board member Ong Ye Kung pointed out in Parliament on 26 May 2020, current interest rates for new housing loans are between 1.4% and 1.8% for the first year, which is significantly lower than 1.8% to 2.3% last year.
SIBOR is a published index, so it’s easy to track. SIBOR was generally moving upwards in 2019 until August, when it gradually started to fall. This meant that last year, SIBOR packages were relatively expensive. After the U.S. cut its benchmark interest rates to near zero in March 2020, however, SIBOR crashed.
For some context, the 3-month SIBOR was around 0.56 in May 2020, which is incredibly low even when compared to November last year, when rates hit a low of 1.76. At the time of writing, the current rate is 0.55.
Have more questions on SIBOR home loan packages? PropertyGuru Finance can help.
Does this mean the property market has recovered?
Not necessarily, but it definitely seems to be recovering.
Although the over-70% increase in sales is indeed positive, it’s worthy to note that the last time there were more units launched than sold was in September 2019. That means things aren’t yet "back to normal".
Also, April is not a ‘normal’ month to benchmark against. April 2020 saw a 58% month-on-month drop in private home sales, making it quite a poor month for properties.
Additionally, May 2020’s numbers are still lagging behind last year’s. There were 952 private home sold last May, which means a -48.9% year-on-year growth.
That said, there is no denying that this market rebound is definitely encouraging as it suggests that home buyers are getting more confident despite the circuit breaker ‘lock down’. Compared to the previous month, more people bought new private homes even though the show galleries remained shut, putting a pause on physical viewings.
On the sellers’ end, developers have also continued business as usual: there were 615 units launched in May 2020, which is not far from the 640 in April.
Can we expect the same for June?
It’s anyone’s guess, really, and the answer to this depends on who you ask.
Citing the dismal 17.4% year-on-year sales figures for 2020 thus far, Mr Sim from CBRE is not too optimistic. "Taking into account that economic uncertainty is likely to worsen in H2 2020, CBRE Research maintains that new home sales volume forecast is expected to fall between 4,000 and 5,000 units (excluding ECs) for the whole of 2020," he says.
Analysts from Huttons and OrangeTee & Tie seem slightly more hopeful.
Lee Sze Teck, Director (Research) of Huttons Asia shares that as traditional buyers return to show galleries, it won’t be surprising if sales go back to pre-circuit breaker levels of over 700 units sold per month.
"Based on caveats, the first week of June saw more than 150 units transacted and possibly 600 units for the whole month by virtual means. As the country moves into the next phase of opening up, property sales may continue to be a hybrid of physical and online viewing of show galleries," he explains.
Ms Sun mirrors his view that this month’s new home sales numbers show encouraging signs. She highlights that according to URA Realis data, 155 new homes (excluding ECs) have already been sold in the first seven days of June, which is more than half the 277 units inked in April.
She adds a word of caution though, "Nonetheless, we should observe the market a while more to ascertain if the market is indeed on the road to recovery."
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