We are still in the midst of Covid-19. Singapore’s economy has weakened and there are more uncertainties ahead. In short, we may be heading into one of the worst recessions in Singapore.

Singapore is entering a recession

BUT.

HDB resale volume in July was highest in 2 years and price has also inched upwards.

HDB Resale Volume has rebound

Condo resales volume also bounced back in July.

Condo Resale Rebound too

New home sales up for 3rd month in a row. Average around 1,000 units sold per month.

New Home Sales Up for a 3rd months in a row

Are you confused by the mixed signals?

Should we enter, or should we not enter the market?

Warren Buffett once said, “Be fearful when others are greedy and greedy only when others are fearful.”

Let us clear the smoke for you.

Unintended Effect of Cooling Measures

With the property prices between 2009 and 2013 outpacing the household income growth, Singapore government introduced a slew of cooling measures to prevent the formation of a property bubble.

Property Prices Rises Faster than Household Income Growth

These cooling measures ended the party and property prices started to fall from its peak in 2013.

Cooling Measures introduced between 2013 to 2019

Since then, between 2014 and 2019, private home price growth (+4.5%) has lagged behind economic growth (+16%), household net worth growth (+36%), cash deposits growth (+72%) and CPF balance growth (+68%).

Private Home Lags Behind Household Income Growth
Private Home Lags Behind Household Income Growth
Property Prices lags behind Cash Growth
Property Price lags Behind CPF

With a substantial build-up of liquidity in the market and a recession in place, what would the smart investors with liquidity do?

They have seized this golden opportunity to enter the market. Their actions have resulted in the healthy take-up rate of new private homes in the past few months.

New Home Sales Up for a 3rd months in a row

As Winston Churchill says, “Never let a good crisis go to waste”.

Oversupply? Look Closer!

Which is a better time to enter the market? When the supply is increasing or when the supply is falling?

Let’s take a real close look at the market supply in the coming months.

Land sales have dropped dramatically after additional cooling measures were implemented on 6 July 2018; putting a brake on the raging en-bloc activity. Ministry of National Development has also taken additional step to stop the burgeoning home supply from en-bloc activities by cutting the supply of government land sales.  

Land Sales have dropped off sharply

In 2019, Covid-19 exacerbated the supply of new land with less than 3,000 new homes added into the market. Shockingly, the 3,000 new homes have been absorbed by the market in the past 3 months.

Covid-19 cuts supply of land sales

Looking at the current Government Land Sales sites, the supply of new homes will remain low. Sites at Northumberland Road and Ang Mo Kio Avenue 1 are the only sites adding to the supply of new homes in 1H2021.

How about the unsold stock of private residential properties?

Every critic out there is shouting that there are plenty of unsold units.

The truth is… the supply is falling.

Here are the numbers and trend:

Supply of unsold units is falling

Here come the exciting part and the signal you do not want to overlook.

History has shown that when the inventory of unsold stock of private residential properties falls below 17,000 units, developers will turn aggressive and snapped up land. From 2017 to 2018, the growing en-bloc activities, in turn, push up the resale prices of private properties.

Based on history, the current inventory is similar to the inventory level in 2014 1Q, and it takes three years then for inventory to fall below 17,000. 

Time from now to 17000 units

Looking forward, with the supply of new land from GLS & en-bloc in 2019 & 2020 much lesser than in 2014 & 2015, coupled with a healthy take-up rate of new homes shown in recent months.

Land Sales is Dropping

Do you think we will reach a low inventory of 17,000 in less than three years?

Reaches 17000 units in 2 years?

Now put yourself in the shoes of the developer or any businessman.

Would you raise or lower your price when your inventories become lesser?

Would you raise or lower your price when there is a lesser competition?

So, when is it an excellent time to enter the market? When the stock is limited, and the developer has increased the prices? Or now, when the inventory is becoming lesser, and the developer has not raised the price?

Is Developer going to increase price?

It’s your call.

Show me the Buyers!

HDB Owners!

It is now a fact that HDB value depreciates over time. When property prices recovered in 2017 for private property, HDB prices continues its downward trend and flatten at the moment. HDB price is likely to remain moderately flat.

HDB vs Private Price Trend

To avoid making losses on their HDB, these HDB owners are hurrying to sell their HDB flat to upgrade to private property for better growth potential.

In the past, HDB owners hold onto their property because their home prices increase at 10, 20, 30 years mark, but this is no longer the case.

Sales of newer HDB (HDB below 10 years old) flats hit its 9-year high in 2019.

Sale of New HDB hit 9 year high

The trend is expected to continue.

Increasing number of new HDB sold

From 2019 onwards, a large number of flats will be reaching their 5-year minimum occupation period (MOP), and they will add to the growing pool of home buyers.

HDB reaching MOP

Next is EC Owners!

Between 2013 to 2018, EC owners are absent because there is no EC that TOP between 2008 to 2013. In case you are unfamiliar with EC, EC owners have to fulfil their 5-year MOP period from year to TOP before they can start on their next property cycle (to sell their EC or purchase their 2nd property).

No EC Top in 2008 to 2013

Starting in 2019, EC owners are beginning to fulfil their MOP period.

Apart from fulfilling their MOP period, they are also sitting on a tidy sum of profit and ready to embark on their private property journey.

EC MOP in 2019
EC MOP in 2020

If these strong signals (1) Strong Liquidity, (2) Reducing Supply & (3) Increasing Demand has gotten you roaring to enter the market.

Wait!

Don’t rush to invest just yet!

All investment carries a certain level of risk, so is real estate investment. So, engage your preferred real estate salesperson to assess the risks involved before proceeding.

Or you can book a non-obligatory 1.5-hr session with me for a 1-on-1 discussion to position yourself for success in real estate investment.

Edwin Goh

Branch District Director, ERA

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In my seven years of real estate career, I have seen many property owners losing their money or have their money stuck in their property investment. Mostly because of bad decisions made based on lack of information, bad advice and unchecked emotions. I would love to meet up with every one of you and help you in your real estate journey, but this may not be possible. So, I have started this blog to share my insights and hopes they will help you make a better decision.

If you are ready to begin your rewarding real estate investment journey with me, Whatsapp me today at +65 9004 5827, till we meet, good luck in your real estate investment journey.

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