The Must-Knows For Those Who Wish To Buy A Private Property In 2022
Updated: Dec 17, 2021
UPDATE: This post was published before the 16 Dec 21 cooling measures. Here's the link to the updated blog on how the cooling measures will impact the property market in 2022.
There have been multiple news reports of property prices rising in the past quarters. Many have a burning question in their head that has paralysed their property plans ahead, 'Have we passed the best time to pick up good prices in the market?'.
Some have told me that the prices now are not sustainable, and they are waiting for prices to drop. Navis Living Group, under the Huttons Group, organises a very informative bi-annual consumer seminar on the property market trends. It is a 3hr power-packed session with the trends and data analysis to give a peak into the possible market sentiments ahead.
While there is no one person who could provide a guarantee of price direction for any new condominium launches, buyers do the option to rely on data, trends and insights to make educated and calculated property decisions.
Here are some of the key trends from the consumer seminar, crystallised for the layman's understanding. Psst psst, if you are just looking for a quick summary, read the headers and the blue text.
Trend 1: A Steadily Decreasing Unsold Supply
Source: URA Q3 Report
It is clear from the above chart that since Q1 of 2019, the inventory of unsold residential homes in Singapore has been decreasing. New condominiums have seen their units being sold with high speeds at their launches:
Jul 2019 - 160 of 200 released units sold at One Pearl Bank (Outram)
Sep 2019 - 276 of 300 released units sold at Avenue South Residence (Kampong Bahru)
Nov 2019 - 216 of 280 released units sold at Sengkang Grand Residences (Buangkok)
Feb 2020 - More than 70% units sold at The M (Bugis)
Mar 2020 - More than 60% units sold at Midtown Modern (Bugis)
Aug 2020 - 66% units sold at NoMa (Guillemard)
Nov 2020 - 96% units sold at The Linq (Beauty World)
Dec 2020 - 70% units sold at Clavon (Clementi)
Apr 2021 - More than 50% units sold at Irwell Hill Residences (Great World City)
Jul 2021 - 85% units sold at Pasir Ris 8
Nov 2021 - 74% units sold at The Commodore (Canberra)
And the list goes on. Overall, the private non-landed sector are seeing keen interest from buyers. Condominiums with slower start sales, especially those launches that were impacted by the COVID restrictions, have also seen stronger sales in the subsequent months despite these unprecedented times. Majority of the developers have ample time to sell out their projects. In fact, the current supply of new private homes is “running dangerously low” as the current pipeline supply of new homes would probably last us for the next one to two years.
IMPLICATION: With a decreasing supply of unsold properties, this will likely give rise to price pressures in the years ahead.
Trend 2: Shortfall In Average 10 Years Completed Supply
Source: URA
This chart shows the number of completed homes in each year. From 2018 onwards, the number of completed homes has fallen below the 10-year supply mark of 14,090 units. This signals that there will be continued shortfall in completed homes for 2022. Hint: Looking at this chart, what do you foresee in 2025 and how can you capitalise on it? Chat with me to start your planning.
Source: URA Q3 Report
Zooming into the latest URA Q3 Report which has more updates on the expected pipeline of completed homes, the number in 2022 remains below the 10-year average supply. While there are more completed homes expected in 2023, the number dips again in 2024 and 2025.
On the average, the number of completed homes for the next 4.25 years is 12,247 which still falls under the 10-year average supply mark. And this URA's forecast is barring any delay in construction, which is a challenge across all property constructions including the HDB BTOs.
IMPLICATION: As the average number of completed homes for the next 4.25 years will be below the 10-year average supply mark, coupled with the challenge of construction delay, it means that the possibility of an oversupply of completed homes to float the market is very unlikely.
If this is mind-boggling for you, make an appointment for a zoom sharing. All of this can be quickly explained in less than 30mins.
Trend 3: Rising Number of HDB Upgraders
Source: data.gov.sg | Charts: NAVIS Research
From the chart, it is evident that there are more HDB estates reaching the five-year Minimum Occupation Period (MOP) in the recent years. In 2019 alone, there are almost 30,000 BTO flats reaching MOP. While it is definite that not all BTO owners would sell and upgrade but with each maturing MOP, it will expand the pool of buyers who are keen to explore property wealth planning over the next few years.
For those who are looking for newly completed condominium units, they are met with a deleting supply and thus may consider new condominium launches. Therefore, in the coming years ahead, we should see a sustained demand for private non-landed properties.
IMPLICATION: There is a record number of MOP flats maturing from 2019 to 2027. In contrast, with low to moderate volume of completed private homes, it is likely to see sustained price growth until Government Land Sales or en bloc supply picks up and construction pace returns to normalcy.
Trend 4: Limited Land Sale Supply Should Signal Greater En Bloc Interest In Developers
Source: data.gov.sg | Chart: NAVIS Research
In the last few quarters, the unsold supply (blue line) is on a steady downward trend, as established above under trend 1. With trend 3 indicating that there is sustained or even growing demand, price pressures and growth are seen in the property price index (yellow line) which is on the upturn.
In most cases, when supply is low and unable to meet demand, the ideal strategy would be to increase the upcoming supply of private homes in the market by having more sites for sale via the Government Land Sale exercise.
But the potential supply (red line) did not show a substantial increase since 2019. Instead, the Government has been very cautious in releasing more land sites due to the tight construction labour market arising from the limited travel mobility of COVID. The smaller volume for land sales have also seen higher number of bidders and record prices from developers in order to replenish their land banks.
Progressing in tandem is the growing activities in the en bloc segment. Since Nov and Dec 2021, there had been many reports of successful en bloc projects and more developments being put up on collective sale.
List of Successful En Bloc Private Non-Landed Projects
9 Dec - High Point at Mount Elizabeth sold to Shun Tak under HK's Pansy Ho
3 Dec - Peace Centre and Peace Mansion at Sophia Road sold to CEL, SingHaiyi and KSH
28 Oct - Watten Estate Condo at Bukit Timah sold to UOL and Singapore Land
List of Collective Sale Private Non-Landed Projects
IMPLICATION: Residential land sale prices continue to rise, which reflects the developers' continuing hunger for land and their optimistic outlook and confidence on the private home prices ahead.
Have any burning questions about these trends, make an appointment for a zoom sharing and all of this can be quickly explained (jokes and anecdotes included).
Trend 5: Rate Hike May Start From 2nd Half 2022 But Sub 2% Interest Rates Likely To Last Beyond 2025
Source: tradingeconomics.com | Monetary Authority of Singapore
This chart depicts the trend of Singapore's Singapore Average Overnight Interest Rate for the past 20 years. Current interest rates have fluctuated below 1%. While there are reports of rising interest rates in 2022 and 2023, but this is likely to be a gradual increase specially since the banks are moving towards using the Singapore Overnight Rate Average (SORA) as a rate benchmark in many of their mortgages.
IMPLICATION: While buyers should exercise caution about the weight of their debt repayment, it may take longer for interest rates to return to the high levels. After the Global Financial Crisis in 2008, it took about 10 years for interest rates to recover to about 2%.
Trend 6: Strong Holding Power Among The Masses
From 2011, the household income level (red line) has been rising faster, and is sufficiently above the property price index for private non-landed (blue line). This shows that household income has grown significantly against private non-landed properties and therefore, there are no signs of bubble emerging.
However, given the Government's cautious approach in the property market, the risk of cooling measures for 2nd and subsequent properties still remains.
IMPLICATION: While the property price index has been rising, which is a dark cloud for many property buyers, it is rising within the sufficiently strong financing abilities of the Singapore households. With well-planned finances in their property wealth planning journey, buyers should have the holding power to see appreciation in their properties.
Some may argue that household income level could be calculated on an average basis and thus possibly inflated by a small group of ultra-wealthy individuals who live the high-life and made record income in the past years.
A Jun 2021 article on the 2020 population census looks into the median household income and it also paints a similar picture. Conducted every 10 years, the study found that real median household income has risen by an average of 1.9% annually for the past 10 years, amid shrinking family sizes. The proportion of households earning at least S$9,000 has gone up from 29.7 per cent in 2010 to 44.2 per cent in 2020 and those earning S$20,000 and above has more than doubled. Thus the strong growth in household income is not limited to a specific group.
For those who are really concerned about the market fluctuations, there is a table that studies the highs and lows of the property price index since 1979. You can see how the property price index reacts through the dot.com bubble, the Asian Financial Crisis and the Global Financial Crisis. Make an appointment for a zoom sharing to learn about this.
CONCLUSION: Singapore Properties Are Still In An Early Bull Market Recovery With Room For Further Growth
As mentioned at the start of the article, these trends are the simpler ones that focus on the demand and supply. There are more insights to support that there is still more room for further growth, such as the international money flow, the Straits Times Index, the S&P500, Singapore Money Supply M2 and so forth. These are the indicators thus far, bearing no big hoo-ha or global crisis of enormous tsunami magnitude.
Some may still prefer to adopt a wait and see approach because prices appear high at every launch. But in the next decade, as money deflates further, buyers should resist holding cash in hand, as it would cost you 2% per annum due to inflation.
You can consider placing your funds into quality assets that can grow and outperform inflation. Singapore properties are likely to continue to outperform various other assets as VTL lanes open up and more foreign investors return in 2022.
My relative shared with me that she viewed One Pearl Bank in 2019 when it was launched with a price tag of over $2,000/psf and it was too pricey. I updated her that the new launch at Ang Mo Kio Ave 1, which is expected in 2022, is likely to have the same starting price tag of $2,000/psf.
By comparing to the earlier launches, the upcoming prices may seem high. But the boats of the earlier launches have already sailed on. We need to see the upcoming launch prices with a 'future' lens to see further and buy into the future and its potential.
Want to find out more about the market trends? Just message me, or you can read up about how to suss out developments with high possibility profits using the 7-step framework.
ABOUT THE AUTHOR
Before the change to real estate, Pris Low was in the non-profit sector for close to 20 years, helping distressed consumers, disadvantaged families, children with special needs, persons with disability and frail seniors.
Now she finds it equally meaningful to be able to work directly with individuals, couples and families to plan their property path, find a right home within their comfortable finances and help them build resilient families that can flourish and overcome challenges.
Each property path is unique to the family, and there is no right and wrong path as long as it guides the family towards achieving their goals at its own pace.
You may hear many agents saying, 'Now is the best time to buy a property'. Pris Low believes that, 'Now is the best time to start your property planning'.
Every journey starts with a single step. Contact me for a non-obligatory chat!