The government cautions Singaporeans from the lure of cheap mortgages, and to remain prudent “given the labour market uncertainties in the current economic situation”.
While the COVID-19 pandemic has triggered Singapore’s worst-ever recession, it has not deterred Singaporeans from snapping up properties, reported Reuters.
The Singapore government expects the economy to drop by 5% to 7% this year, surpassing the record 2.2% contraction posted in 1998. It also marks the worst recession since the city-state’s independence in 1965.
Some buyers, such as Jenny Lin, believed the pandemic offered an opportunity to get on the property ladder at the third most expensive housing market in the world, following Hong Kong and Munich, said CBRE.
“When COVID-19 first started you could really get a good bargain on the property price, as many people were rushing to sell their properties away for quick cash to salvage their main business,” Reuters quoted the 26-year-old accountant, who expedited her acquisition of a $530,000 one-bedroom apartment in May.
32-year-old Jason Chen also purchased a three-bedroom apartment for $1.7 million in the middle of the pandemic, believing that the price will eventually increase.
The broad-based buying spree – which saw prices and sales rise to multi-year highs – has some parallels to the housing market boom in late 2009, when the city-state emerged from the global financial crisis, said Reuters. The boom had forced the government to roll out several rounds of property cooling measures to rein in prices.
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Although analysts do not expect to see a repeat given that most of the curbs remain in place, policymakers had cautioned buyers from the lure of cheap mortgages.
“Given the labour market uncertainties in the current economic situation, prospective buyers should remain prudent in their property purchase,” said the Ministry of National Development in a written response to a question in Parliament regarding the risk of a “bubble”.
In Q3 2020, property prices in Singapore climbed 0.8% to their highest level since 2013, while sales volume surged to a two-year peak, showed the latest data.
OrangeTee and Tie analysis showed that Singaporeans acquired nearly 81% of all private homes sold in Q3 2020, the highest proportion since early 2009.
Private home prices in Singapore only dropped in the first quarter and have been on the uptrend since then, despite this year’s turmoil.
Comparatively, prices fell for four straight quarters between 2008 and 2009 during the global financial crisis.
This year’s overall price hike has been modest at 0.1%. For asset manager Amy Zhang, however, Singapore real estate is a safer bet than the volatile stock market.
Long-viewed as a safe-haven, the tightly controlled market does have some risks. Tighter foreign labour curbs and retrenchments saw expatriates, who tend to rent, leave Singapore, pushing rents lower and driving the first drop in the city-state’s population since 2003.
Despite this, Zhang, who recently acquired a $1.7 million investment property off plan, is betting on a robust rental market once her property is completed in two to three years, noted the Reuters report.
The city-state has long attracted multi-millionaires from China and the super-rich from its less developed neighbours.
The political uncertainty facing rival Hong Kong also helped cement that appeal, pointed analysts.
“Once all travel restrictions are lifted, there will be an inflow of foreign investments into the property market,” said Chen as quoted by Reuters.