The real estate firm noted that the month-on-month rebound in new home sales in May and the return of homebuyers to acquire units during Phase 2 of the circuit breaker is “a potential sign of underlying demand, particularly for strategically-priced units”.
Real estate firm PropNex expects homebuyers – especially those more confident of job security or have built up enough savings for investment – to return to the market as concerns surrounding the COVID-19 pandemic ebb over time.
PropNex Research data showed that after a positive Q1 2020 (where there were 4,269 units sold, excluding executive condominiums (ECs)), the circuit breaker measures in April disrupted property activities and slowed the growth momentum in April and May. Total private home sales slumped in April and May at 647 and 660 units, respectively.
Out of the 647 units sold in April, 277 units were sold in the primary market and 370 units were resales. Despite being affected by the circuit breaker measures for the entire month, new home sales soared 75% month-on-month to 486 units in May, while the resale market plunged 53% to 174 units.
PropNex CEO Ismail Gafoor said the inability for buyers to view units during the circuit breaker affected the resale market as buyers prefer to personally examine the property first before transacting.
“In contrast, it was observed that buyers of new homes became more comfortable with digital viewings and transacting online from April to May, with attractively priced projects and low interest rates likely nudging them to make a purchase.”
While PropNex expects the cautious sentiment and tepid growth to weigh on prices and home buying interest, it noted that May’s month-on-month rebound in new home sales and the return of homebuyers to acquire units during Singapore’s Phase 2 of the circuit breaker is “a potential sign of underlying demand, particularly for strategically-priced units”.
The real estate agency noted that a bigger proportion of homes were transacted within the price quantum brackets of below $2 million.
In fact, 95% of new homes sold in May were valued at $2 million and below, or the highest proportion of monthly sales in the first five months of 2020. It stood at 89% in April, 90% in March and 92% and 73% in February and January respectively.
PropNex attributed the trend to “a combination of factors, including the sale of a higher number of smaller units and selective discounts offered by developers”.
“These categories of homes – mass market and mid-tier – should continue to drive demand with support from upgraders/owner-occupiers,” it said.
Realis data showed that the median transacted price for non-landed residential properties fell from $1.4 million in January to $1.2 million in May, possibly indicating a hike in demand for more affordable homes.
In regards to property size, homes measuring below 800 sq ft proved popular among investors and buyers. Residential units spanning 500 to 800 sq ft accounted for 62% of total sales in April and 54% in May.
This could be due to some investors buying smaller units and buyers remaining very price sensitive, acquiring smaller units to keep overall quantum affordable.
Barring a resurgence of COVID-19 cases as well as widespread job losses, PropNex expects this year’s private residential sales to stand at 14,500 to 15,500 units, including 8,000 to 8,500 new homes and ECs.
However, it does not see a sharp decline in prices considering the holding power of developers and that Singapore households are not generally overleveraged for property acquisition.
The real estate agency forecasts private home prices to drop by up to 3% this year.
“The long-term outlook for the Singapore residential property market remains positive, as factors that support the housing market – including pro-business policies, safety, and the stable political environment – remain intact. A look back in history paints a resilient picture of the residential market, which has recovered after each crisis with prices generally keeping pace with economic growth,” said Wong Siew Ying, Head of Research and Content at PropNex.
Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email firstname.lastname@example.org