CoVid-19: Is it a good time to invest in private property in Singapore?
The year of 2020 has definitely been strange so far! With all the disruption that seems to follow the CoVid-19 spread around the world, you may be wondering what all this means for Singapore – and its property market. Well, thankfully, the private property market in Singapore has remained pretty stable thus far, but that does not mean it’s completely unaffected! CoVid-19 has introduced some rather drastic alterations to the dynamics of the market, and here are some trends we’ve seen.
Reduced Private Property Prices in the Market
In Singapore’s history, the demand for private properties has generally followed our annual gross domestic product (GDP) per capita. Which makes sense, because when the GDP per capita of a country increases, it generally means that its people have higher disposable incomes. This means that more people will be able to afford to make a move during this time, and so more people can buy new houses, and the prices for private property in Singapore increase as a result.
What we’re looking at now, though, is the aftermath of the CoVid-19 pandemic, which may cause many countries’ (including Singapore’s) GDP to drop into a recession. In addition to this, home viewings and showcases were stopped for several months during the circuit breaker period, leaving fewer buyers who were willing to buy a home they had never personally seen. With this lower demand in mind, it’s easy to see why private property prices fell in both the first and 2nd quarters of this year. Housing Development Board (HDB) homes, though, experienced a much smaller fall in comparison.
Lowered Interest Rates
If you’re looking to take a bank loan to buy a home, you may have noticed that the cost of borrowing in Singapore is largely linked to the Singapore Interbank Offered Rate (SIBOR). In the wake of CoVid-19, the SIBOR has actually lowered significantly in the past few months, which means interest rates are at a major low point right now! In fact, the monthly SIBOR is currently set at 0.5%, down from the high 2% in June 2019. With such substantially decreased interest rates, the cost of borrowing in Singapore has been lowered significantly. This means that despite Singapore’s decrease in GDP in the first half of the year, it might still be easier for some to buy private property in Singapore by taking out loans at lower interest rates.
Fluctuating Foreign Currencies
We promise – this is still relevant to private property in Singapore. With a pandemic as widespread as what we’ve seen in CoVid-19, it is no wonder the global economy has been drastically affected! But when so many countries face uncertainty, it is inevitable that exchange rates in the global currency market will begin to fluctuate. But when currencies and economies face uncertainty, many people are more inclined to channel their wealth into more “stable” investments. No, not stocks – quite a few of these are unpredictable too, especially since we’re living in unprecedented times. We’re talking gold, jewellery, and property.
Now, at this point you may be thinking “it’s a great time to invest in private property in Singapore! After all, prices and interest rates are down, and property is a more stable investment in this time!” And yes, while this may be true, there are always two sides to the coin. Even though the above 3 factors may make it easier to invest in private property in Singapore, note that in the coming months, income that comes from renting out a private property might decrease. This is simply because fewer people can afford it. As you probably already know, CoVid-19 has been devastating to many businesses in Singapore, which has led to fairly significant pay cuts in various sectors. Just this May, for example, the Straits Times reported that many foreign expats have begun requesting a cut in their monthly rents in response to lower salaries, some as much as 50%.
Is it a good time to invest? A good time to sell?
Ah, back to the central question: is it a good time to invest in private property in Singapore? As the cases come under control and stability returns to the economy, property experts believe that for those who can afford it, now may actually be a pretty good time to buy new properties. After all, with both interest rates and private property prices being at a major low point right now, it might make it much easier for some to meet the asking price of a private property house. But just be careful – think of it as a long-term investment rather than a way to make a quick buck. Rental yields are falling, and it is hard to predict how much longer it will be before property prices begin to rise again.
As for selling, it probably may not be the best time to do this. Psychologically speaking, people tend to go for the most stable option in times of uncertainty, and for them, that’s the house they’d already live in. So demand is down, prices are down, which makes it more difficult for you to avoid selling your home at a loss – or worse, making a negative sale. Instead, perhaps consider renting out a room in your property if you need finances – this may be a nice temporary source of income for a while until market conditions change.
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