2020 Year-End Review: Key Trends for Singapore Home Buyers to Know

2020 has been an unprecedented year in the Singapore property market. The Covid-19 outbreak resulted in the first-ever Circuit Breaker, from 7th June to 1st April. During this time, no showflats were opened, and no viewings were allowed. Coupled with one of the largest contractions in GDP on record, it was a nerve-wracking period for property buyers and sellers alike.

However, 2020 is also the year in which the Singapore property market proved its resilience. The private property price index rose nonetheless, while the resale flat market managed to turn around after almost seven years of decline. Even landed homes saw a surge in sales, despite the depressed economic climate.

Going forward into 2021, here are some of the key trends that have developed, and which are set to affect Singapore home buyers:

Private non-landed home prices to date

Island-wide, condo prices (excluding Executive Condominiums) rose about 5.2 per cent over the year. This is from an average of $1,603,160 in December 2019, to about $1,686,583 to date.

Going by region, OCR condos saw the biggest gains over the year, very closely followed by CCR condos.

In the CCR, average prices rose about 14 per cent, from an average of $2,530,963 to about $2,887,455 at present.

In the RCR, prices appreciated 10.7 per cent, from an average of $1,509,217 to $1,670,979.

In the OCR, prices rose 14.6 per cent, from about $1,140,752 to $1,307,607.

Landed home prices to date

Island-wide, landed home prices are still down around 13.2 per cent from Q4 2019. However, note the surge in price and transaction volumes between Q2 and Q3, which suggests a renewed interest in the market.

Prices averaged $4,874,014 in Q4 of 2019, and are around $4,228,604 at present.

Resale flat prices to date

Note: HDB doesn’t show transaction data when the volume is too low for a certain kind of flat (e.g. the sale of a million-dollar maisonette may not be reflected, if it was the only transaction of its kind in a give year). This is to avoid any distortions from the outliers.

3-room flats saw the highest appreciation in the year to date, from an average of $304,306 in Q4 2019 to $321,627 at present.

4-room flats gained 4.36 per cent, from $428,636 to $447,304.

5-room flats are up almost 3.3 per cent, from $550,122 to $537,246.

Executive flat prices haven’t changed much over the year; they averaged $646,333 in Q4 2019, and now average $653,158.

But wait, I thought there was a record-breaking number of million-dollar flats in 2020?

There were indeed, with 72 such transactions, as opposed to 64 transactions for the whole of 2019. However, million-dollar flats are outliers that make up around 0.3 per cent of the total transaction volume. As such, they are not reflective of the overall resale flat market.

Top developer sales for end-2020

Note: the following are based on November 2020 sales, as it’s still only the third week of December when this is being written. Price data is from Square Foot Research.

Development Units sold / total units Median price (psf) District / Planning area
The Linq @ Beauty World All sold (120) $2,171 21 (Bukit Timah)
The Landmark 109 out of 396 $2,135 03 (Outram)
The Garden Residences 547 out of 613 $1,641 19 (Serangoon)
Treasure at Tampines 1,631 out of 2,203 $1,432 18 (Tampines)
Forett @ Bukit Timah 302 out of 633 $1,941 21 (Bukit Timah)
Piermont Grand 688 out of 820 $1,133 19 (Punggol)
Jadescape 1,057 out of 1,206 $1,752 20 (Bishan)
Urban Treasures 47 out of 237 $1,998 14 (Bedok)
Leedon Green 88 out of 638 $2,603 10 (Bukit Timah)
Riviere 82 out of 455 $2,541 03 (Singapore River)

For more details on any of the above projects, do contact me with your questions.

Key trends going forward from 2020

Some of the notable factors that emerged this year are:

  • Lower home loan interest rates
  • Restrictions on the re-issue of Option to Purchase (OTP)
  • Resale flat resurgence
  • A new category of Assisted Living flats

In addition, one of the factors ending the year is the end of mortgage deferments.

1. Lower home loan interest rates

The United Stated Federal Reserve has cut interest rates, and keeping them at near zero till end 2021 or 2022. This has a knock-on effect on the Singapore Interbank Offered Rate (SIBOR), to which some (not all) home loans have been pegged.

Suffice to say that, at the time of writing, it’s possible to get home loans for as low as 1.2 to 1.5 per cent per annum; much lower than even the HDB loan rate of 2.6 per cent. This is likely to persist for as long as interest rates stay low.

As an example of the difference, consider a loan of $1.125 million, over a period of 25 years. At an interest rate of two per cent (common prior to the rate cut), the monthly repayment is about $4,768.

Over all 25 years, the total interest repayments would be around $305,508.

The same loan, if you can secure the lowest existing rate at 1.2 per cent, comes to monthly repayments of about $4,342, with total interest of about $177,733.

As such, the low interest rate makes our homes more affordable, while also pushing up potential gain and rental yield for investors. Note, however, that this is true only for those who use SIBOR-based loans. HDB loans, as well loans based on the bank’s internal board rate, may not be much cheaper than before.

Home owners who currently pay higher rates may also be interested in repricing or refinancing to a cheaper loan. Do contact me if you need help with this.

However, note that the falling interest rate will not help with regard to loan applications

The banks will always use a projected interest rate of 3.5 per cent, regardless of the current loans market. This is to ensure you can handle any spikes in the interest rate. As such, the current low rate will not help to meet requirements like the Total Debt Servicing Ratio (TDSR).

2. Restrictions on the re-issue of the Option To Purchase (OTP)

The OTP is the first step to buying a home, and involves a non-refundable deposit; this is typically a five per cent “booking fee” at new launches. In most cases, the OTP is valid for 21 days, after which you must complete the sale or the OTP will lapse (and the deposit is forfeited).

Previously, many property developers had “reservation” style schemes, where they would agree to extend the OTP automatically if you missed the deadline. However, the government has now stopped this practice; at best, a developer can extend your OTP to 12 weeks.

On the upside, this will result in more accurate data, when examining sales numbers. Previously, sales were lodged as soon as the OTP was granted, thus distorting sales figures as some of the units were later returned.

On the downside, this places more timing pressure on upgraders. You’ll no longer have the luxury of repeatedly renewing the OTP, and then buying only after your previous home is sold. So while the OTP restriction doesn’t truly stop serious buyers, it will represent an additional inconvenience for some.

3. Resale flat resurgence

Resale flat prices have finally shown an uptick, after almost continuous decline since 2013.

Flat prices are still down around 6.4 per cent since their last peak in 2013. Even so, the recent signs of recovery will be a relief to flat owners, especially those with an eye toward upgrading.

There are three likely reasons why we’re seeing an uptick in resale flat prices / demand, which are likely to continue into 2021 and beyond:

  • The rules for buying a resale flat have been relaxed since last year, with regard to using of CPF, and higher income ceilings (the current income ceiling for flats is $14,000 a month).
  • A record number of flats, around 50,000, are reaching their Minimum Occupation Period (MOP) in 2020 and 2021. This results in more supply, as upgraders sell at the end of five years. Flats that are literally five-years old are in high demand; buyers don’t need to wait for construction, and lease decay is a non-issue.
  • Due to the onset of Covid-19, some home buyers may settle for mature-estate resale flats, or larger resale flats, rather than a condo. This is a cautious choice. While expensive compared to other flats, these are still at a much lower price than most ECs and private condos.

4. A new category of assisted living flats

Assisted living flats, which come with leases as short as 15 to 35 years, will be available in the first pilot project in Bukit Batok this year. These flats cost just up to $65,000 before subsidies (not inclusive of the Basic Care Package, which includes medical and assisted living services).

These flats will pose an interesting alternative to short-lease, two-room flexi-flats, which have long been the default choice for many retirees. It’s a smart move given our ageing population, and most Singaporeans can afford an assisted living flat – with the care services – even if downgrading from a regular three-room or two-room flat.

Finally, mortgage deferment is ending this year

The mortgage deferment scheme, which allowed deferred home loan repayments from April till December 2020, is coming to an end. So far, there’s no word on whether the deferments will be followed up with another.

Some buyers were waiting on the expectation that, when the mortgage deferments end, there may be more “fire sales”. That is, there will be more desperate sellers willing to offload their properties for cheap.

So far, there has been no sign of this; and I think buyers who expect a rush of fire sales may be underestimating Singapore’s property owners. Due to tight restrictions like the Total Debt Servicing Ratio, and the size of most CPF accounts, it’s improbable that a large number of desperate sellers will rush the market. If that were about to happen, we would have seen the signs long before December 2020.

As such, even with the volatility caused by Covid-19, it’s optimistic to assume a strong buyers’ market for 2021. Sellers have ample holding power to wait out the situation, and prices appear to be increasing rather than falling (see above).

I would stay prudent given the state of the economy; the old rule – not buying a property that exceeds five times your annual income – holds true in times like these. However, I wouldn’t also count on timing the market, and getting any discounts from “desperate” sellers in 2021; not given how few and far between they seem.

For more on the unfolding property scene and the latest updates, follow me on RonChongProperty.sg. In the meantime, I wish you and your loved ones a happy Christmas, and a great new year to come.

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