SINGAPORE, July 25 — In spite of the worsening economic conditions in the second quarter of the year, property hunters have not let up on spending, driving up prices for new private housing units and resale prices for public housing units last month.

A flurry of sales activity from mid-June helped to boost the numbers, at a time when Singapore entered the second phase of reopening from June 19, after curbs were imposed on activities during the circuit breaker in April and May.

Flash estimates by the Urban Redevelopment Authority (URA) up to mid-June predicted a 1.1 per cent drop in private home prices.

In the final second-quarter data released yesterday by URA, transactions in June’s final two weeks drove the price index for the second quarter up by 0.3 per cent from the first.

Singapore entered a technical recession after its economy contracted 41.2 per cent in the second quarter of the year and economists have told TODAY that job losses and wage cuts are set to continue.

Property analysts said that the market will calm down when the euphoria of the Phase Two reopening settles down and people become more attuned to the economic sentiments of the ongoing recession. The tapering off of the Singapore government’s Budget measures to help retain jobs will also affect consumer sentiments in the months ahead, they told TODAY yesterday. 

Data from the Housing and Development Board (HDB) released on the same day likewise showed that resale prices for government-built flats also crept up slightly by 0.3 per cent quarter-on-quarter. 

However, the resale volume of HDB flats fell sharply by 41 per cent compared to the first quarter.

Private property sales fell by 20.3 per cent over the same period. This figure excludes executive condominiums, which are public-private housing hybrids built by private developers.

Experts noted that the diminished sales volume is largely due to the circuit breaker curtailing transactions.

For private properties, the lower sales volume may also mean that wealthy buyers may be disproportionately edging prices up, they said. 

What drove up private home prices

Pent-up demand

Earlier this month, property analysts told TODAY that a jump in transactions and purchases in the last two weeks of June were due to showflats reopening in Phase Two, a pent-up demand and buyers were more willing to acquire the assets. 

Analysts who spoke to TODAY yesterday gave the same reasons to explain the final data, saying that for prospective buyers, the decision to get an apartment might have been made months ago. Desmond Sim, head of research for Southeast Asia at real estate consultancy CBRE, said that some sales decisions have already been made before the pandemic struck. 

"Those that have made decisions to buy would probably push pen to paper (during Phase Two),” he said.

"Sales may be driven by some developers offering discounts and incentives... The low interest rate environment (due to Covid-19) has also motivated buyers.” 

Longer-term positivity

The lifting of the circuit breaker in June also saw buyers’ sentiment getting a boost, Nicholas Mak, head of research and consultancy at ERA Realty, said.

"Sentiments improved, (people began) thinking that now the situation is better, now life is gradually going back to normal, which means they also feel that the authorities have the situation under control,” he said.

"All this leads to more confidence… Some people will be willing to commit to buy property.” 

He added that property buyers usually do not solely focus on the present economic conditions. 

"When (they) look forward, most people will think that probably three years from now, there will be a vaccine from Covid-19 and things will be better, so I might as well buy now,” Mak said.

"Who knows if prices will go up when the vaccine comes in?” 

Wealthier buyers

Analysts said that with the fall in sales volume, it may point to an oversaturation of wealthy buyers pushing private property prices up.

Although URA data published earlier this month showed that sales of new private housing units in Singapore more than doubled in the month of June compared to in May, the figures were negative quarter-on-quarter, with the second quarter seeing a fall in sales across private residential units, executive condominiums and resale transactions. 

In the final data for the second quarter, developers sold a total of 1,713 new private residential units — 20.3 per cent lower than the 2,149 units in the first quarter. 

Sim of CBRE said that the sale of expensive properties such as those in the financial district helped contribute to the increase in prices. 

"During the circuit breaker period, there were fewer sales, so when the sample size was smaller, any sales coming from (transactions that involve higher prices) will skew the numbers to become bigger.” 

Ong Kah Seng, who has been a property analyst for 16 years, said that wealthy buyers were "quite undeterred” by the pandemic, and will be looking into recalibrating their investment portfolios during this time. 

"Essentially, wealthy buyers are not underpinned by affordability issues,” he said. 

Why the large drop in HDB resale volume

Wong Siew Ying, head of research and content at property firm PropNex, said that the 41.9 per cent decline in HDB resales does not reflect weaker demand for such homes.

There were 3,426 resale flats sold in the second quarter, compared with 5,893 in the first.

She said that the circuit breaker and the Phase One measures in early June restricted agents from conducting property viewings and closing sales, so naturally, sales were not conducted or closed.

However, transactions "picked up significantly” upon the reopening of the economy, which helped to boost HDB resale volume for June, even though it was still a poorer showing for the quarter.

Agreeing, Ong, the independent property analyst, said that HDB resale flats are "disadvantaged” because virtual viewings, which helped to bolster private property sales, are not feasible for HDB resale units. 

"Generally, they are in a very old condition and most of them require renovations,” he said. During the circuit breaker period, renovations were suspended, so transactions were likely put off.

what to expect for rest of the year 

Analysts predict that with the upbeat sentiment from Singapore’s reopening settling and with Covid-19 still dealing blows to the economy, private property prices are set to cool off in the next few quarters. 

"Let’s not forget that jobs, occupancy costs are now held resilient by government handouts,” Sim of CBRE. 

The Singapore government has dedicated close to S$100 billion (RM308.2 billion) over four budgets — or nearly 20 per cent of the gross domestic product — to support Singaporeans during the Covid-19 pandemic. 

"The true resilience will come when all this bolstering eases off.” 

Ong said that it would not be ideal for prices to keep rising, and it would be better for prices to "correct downwards” by 1 to 1.5 per cent each quarter for the rest of the year. 

"That would truly reflect prices that match the full impact of the economic conditions, and the type of pricing that will ensure that buyers are buying with prudence and help to support price sustainability and affordability,” he said. 

HDB resale prices, on the other hand, are likely to remain healthy for the rest of the year.

Ismail Gafoor, chief executive officer of PropNex, said that housing policies implemented before the pandemic — such as the enhanced Central Provident Fund Housing Grant, higher income ceilings and relaxation of rules in using CPF to buy older HDB flats — has helped keep HDB resale prices stable. 

"That prices held up in recent quarters during the pandemic reflects the strength of the HDB resale market, where sellers still have sufficient holding power and are able to maintain their asking prices,” he said. — TODAY