Private home sales up in 2020 while retail sales continue to lag

January 25, 2021

While retail sales have recovered since the start of the pandemic, it remained weaker compared to pre-COVID days. Meanwhile, private home sales and prices continue to rise, prompting experts to speculate on cooling measures to be implemented soon. 

Demand for private homes remained high in Singapore last year, while the retail market witnessed lower sales as fewer tourists roamed the city-state’s malls due to travel restrictions.

NUS’ Institute of Real Estate and Urban Studies (IREUS) data showed that the retail sales index fell by over 40% year-on-year in April. New private home sales also dropped by about 58% to 256 units as physical home viewings were disallowed and sales galleries were closed, reported The Business Times (BT).

Retail sales further declined in May, plunging by over 52%. But as the economy progressively re-opened, retail sales increased possibly due to “revenge spending” following the lifting of the circuit breaker, said IREUS Deputy Director Lee Nai Jia.

While retail sales have recovered since then, it remained weaker compared to pre-COVID days. Retail sales declined 1.9% year-on-year in November, after posting a revised 8.5% year-on-year fall in October.

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BT noted that November’s smaller contraction was due to sales events, like Singles’ Day and Black Friday.

However, sales of clothes, shoes, cosmetics and food continued to drop due to the severe decline in tourists. The number of visitor arrivals fell 84.4% year-on-year between January and November 2020.

Meanwhile, private home sales improved significantly as the city-state entered into Phase 2 of the re-opening, which saw the re-opening of sales galleries as well as the resumption of physical home viewings, among other things.

In fact, monthly new home sales breached the 1,000 unit mark in July, August and September.

Although real estate agents conducted virtual viewing like video walkthroughs during the circuit breaker, prospective home buyers generally preferred seeing the unit personally before committing to buy.

The spike in new private home sales was attributed to low interest rate environment as well as the demand from upgraders and those flush with cash from the previous collective sale cycle.

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“The increase in sales gained further traction as more buyers held optimistic expectations of the private home market due to the resilience in home prices and demand,” said Dr Lee as quoted by BT. 

“Rather than recalibrating and stabilising, the private home sales market continued to gain momentum and (trend upwards).”

New private home prices climbed 2.1% quarter-on-quarter in Q4 2020, the steepest quarterly increase in more than two years. For the whole of 2020, private home prices rose 2.2% versus the 2.7% growth posted in 2019, showed the Urban Redevelopment Authority data.

In December alone, new private home sales exceeded 1,000 units thanks to strong sales at projects such as Clavon along Clementi Avenue 1. The slower sales posted in October and November were attributed to fewer launches.

Clavon emerged as the top-selling project in December, shifting 473 units at a median price of $1,637 per sq ft (psf). The 172-unit Ki Residences at Brookvale came in second as it shifted 660 units at a median price of $1,766 psf.

The retail industry, on the other hand, continue to face a challenging outlook even as Singapore residents and the year-end festive period likely improved retail sales in the later part of 2020.

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“The retail scene remains challenging, especially for retail outlets that rely on tourist spending. Additionally, under Phase 3, capacity (levels) for malls and large stand-alone stores are capped at 65%, limiting the revenue of retailers,” said Dr Lee.

He expects the residential sales momentum to continue, “especially amid growing optimism with the COVID-19 situation under control”.

But with the government flagging that it is closely watching the market to ensure private homes remain affordable, “the risk of government intervention will be high if the real estate market becomes overheated”.

Among the major launches for this year so far is Normanton Park by Kingsford Huray Development. The mixed-use development – which features 1,840 apartments, 22 two-storey strata terrace homes and eight commercial units – sold one-third of its residential units at an average price of $1,750 psf during its first day of sales.

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