Singapore’s housing market remains healthy, despite a struggling economy caused by the COVID-19 pandemic. The private residential property index rose by 2.21% during 2020, following y-o-y rises of 2.67% in 2019, 7.85% in 2018, and 1.09% in 2017, according to the Urban Redevelopment Authority (URA). When adjusted for inflation, house prices rose by 2.16% y-o-y last year.

During the latest quarter (i.e. q-o-q in Q4 2020), residential property prices increased 2.08% (1.67% inflation-adjusted).

The Outside Central Region is still rising fastest:

• In Core Central Region (CCR), prices of non-landed private residential properties fell slightly by 0.37% (-0.43% inflation-adjusted) during 2020, following a 1.7% decline in 2019, according to URA. Yet quarter-on-quarter, prices increased 3.17% (2.76% inflation-adjusted) during the latest quarter.
• In the Rest of Central Region (RCR), property prices were up by 4.69% (4.64% inflation-adjusted) during 2020, an improvement from the prior year’s 2.8% growth. Quarter-on-quarter, prices rose by 4.42% (4.01% inflation-adjusted) in Q4 2020.
• In Outside Central Region (OCR), property prices rose by 3.2% (3.15% inflation-adjusted) during 2020, following a y-o-y increase of 4.2% in the previous year. During the latest quarter, prices increased 1.77% (1.37% inflation-adjusted).

The continued increase in house prices was mainly due to strong demand, coupled with weak residential construction activity. There were 10,833 uncompleted private residential units launched in Singapore in 2020, down from 11,345 units in 2019, according to figures released by URA. On the other hand, residential property transactions, including new sales, sub-sales and resales, rose strongly by 9.2% y-o-y to 20,909 units in 2020, following annual declines of 13.5% in 2019 and 11.5% in 2018, according to URA.

Yet due to the imposition of pandemic-related travel restrictions and lockdown measures, foreign demand plunged last year, with the total number of private houses purchased by foreigners in the country falling to a 17-year low of just 742 units in 2020, according to real estate consultancy firms ERA Realty Network and Orange Tee & Tie.

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Overall, market sentiment remains positive, with many hopes on the successful rollout of COVID-19 vaccines and improving economic conditions. The volume of resale homes could increase by around 5% to 10% in 2021, while new home sales are expected to remain more or less steady, according to Chistine Sun, the head of research and consultancy at OrangeTee & Tie. Private home prices will continue rising between 1% and 4% this year.

Singapore’s economy contracted by 5.8% in 2020 from a year earlier, following a y-o-y growth of 0.7% in 2019, according to advance estimates released by the Ministry of Trade and Industry (MTI). The economy grew by an average of 5.3% annually from 2010 to 2018.

The economy is expected to grow by 5% this year and by another 2.6% in 2022, according to the International Monetary Fund (IMF).

Foreigners have been able to buy any apartment without prior government approval since the Residential Property Act of July 19, 2005. However, foreigners still cannot purchase vacant land and landed properties without permission from the Singapore Land Authority. Non-residential property is not subject to these ownership restrictions.

Prices of newly-launched developments

Prices in some newly launched residential developments in Singapore (based on Savills Q2 and Q3 reports):

In Core Central Region (CCR):

• At the Mooi Residences, on Holland Road, prices of residential units ranged from SG$ 2,535 (US$1,906) to SG$ 2,669 (US$2,006) per sq. ft.
• In 15 Holland Hill, located on Holland Hill, residential units are priced at SG$ 2,702 (US$2,031) to SG$ 3,063 (US$2,302) per sq. ft.

In the Rest of Central Region (RCR):

• In Forett At Bukit Timah, located in Toh Tuck Road, residential properties are priced from SG$ 1,647 (US$ 1,238) to SG$ 2,120 (US$1,594) per sq. ft.
• In Myra, located in Meyappa Chettiar Road, prices of residential units ranged from SG$ 2,016 (US$1,515) to SG$ 2,273 (US$1,709) per sq. ft.
• In Noma, on Guillemard Road, prices ranged from SG$ 1,480 (US$1,113) to SG$ 1,808 (US$1,359) per sq. ft.
• In Penrose, situated in Sims Drive, residential units are sold for SG$ 1,396 (US$1,049) to SG$ 1,856 (US$1,395) per sq. ft.
• In Verdale, located in De Souza Avenue, residential units are priced at about SG$ 1,607 (US$ 1,208) to SG$ 1,855 (US$ 1,394) per sq. ft.

In the Outside Central Region (OCR):

• In Burghley Drive (landed), located in Burghley Drive, residential units are sold for SG$ 2,008 (US$1,509) per sq. ft.
• In Parkwood Residences, residential units are priced at SG$ 1,323 (US$995) per sq. ft.

Another round of property curbs?

Aside from the temporary relief measures announced in May 2020 (which was renewed in October 2020) that primarily provides property developers up to six months extension on their original project completion period (PCP) in relation to the remission of Additional Buyer’s Stamp Duty (ABSD), most of the existing residential property cooling measures were maintained.

“At this point in time, we also want to be, collectively as Singaporeans, very prudent and careful, especially when you enter into commitments that are very long term,” said National Development Minister Desmond Lee. “A home is a big ticket item and it’s for the well-being of Singaporeans that some of the measures are there.”

In fact in January 2021, talk of another round of property cooling measures has intensified as house prices continue to rise amidst strong sales. However, some market analysts believe that it is too early for such move.

“We believe the government will wait out a few quarters and monitor prices. In the meantime, it is sending out messages that buyers should be prudent and that prices should not continue to move up significantly before an actual economic pickup,” said Tricia Song, research head of Colliers International Singapore.

After partially relaxing its market-cooling measures in March 2017, the Singaporean government reversed gear after 2017 sales reached 25,010 units, up 52.7% y-o-y - the biggest increase since 2009, according to URA.

From July 6, 2018, the Additional Buyer’s Stamp Duty (ABSD) rates were raised by 5% for all homebuyers and by 10% for entities, except for Singaporean citizens (SCs) and permanent residents (PRs) purchasing their first residential property. An additional ABSD of 5% was also introduced for developers buying residential properties for housing development.

The government also tightened loan-to-value (LTV) limits on residential property loans from 80% to 75%.

Earlier, the government had raised the stamp duty on home purchases with value exceeding SG$ 1 million (US$ 752,332) from 3% to 4% in February 2018.

These property curbs have now successfully restrained the market.

“In an economy that is growing in nominal terms at 3% to 5%, it is not sustainable to have property prices increasing at double digits,” said Ravi Menon, managing director of MAS.

Singapore government firmly restrains property prices

The moderation of house prices over the past years is the result of deliberate government policy.

Before and after the global economic crisis, Singapore’s property market surged. The residential property price index rose 38.2% during the space of only one year to Q2 2010 (34% inflation-adjusted).

The Singapore government sensibly took steps, and when these turned out to be not enough, took further measures.

In October 2012 it limited the mortgage term to 35 years, and lowered loan-to-value (LTV) ratios to 60% for loans longer than 30 years (or loans stretching beyond age 65).

This was only the first of 10 rounds of property-market cooling measures.

Seller’s stamp duty (SSD) was then introduced on owner-occupied housing sold within a year of purchase. A little later, the stamp duty was revised upwards, with sales of owner-occupied houses taxed sold within a year of acquisition taxed at 16% of sale price. Then the holding period was increased from one year to four years. In subsequent rounds, LTV ratios were lowered and minimum cash down payment increased.

Despite these measures, property prices kept surging. In the sixth round, new residential loans were capped at 35 years, with existing loans over 35 years facing tighter LTV ratios. In the seventh round the government revised the additional buyer’s stamp duty (ABSD), increasing rates from 5% to 7% for Permanent Residents’ (PRs) first residential property purchase, and Singaporeans’ second residential purchase.

This resulted in a 23.5% decline in sales transactions within a year, but prices continued to surge till the end of 2013.

Eighth, ninth and tenth rounds of market-cooling measures followed.

These market-cooling measures have been effective, as evidenced by the 10% decline in property prices from 2014 to 2017.

Residential property sales rising

Residential property transactions, including new sales, sub-sales and resales, rose by 9.2% y-o-y to 20,909 units in 2020, following annual declines of 13.5% in 2019 and 11.5% in 2018, according to URA.

In 2020:

• Uncompleted private residential property sales rose slightly by 1.1% y-o-y to 9,838 units.
• Completed private residential property sales plummeted by 19.1% y-o-y to just 144 units.
• Sub-sales fell by 31.5% y-o-y to 198 units.
• Re-sales rose by 19.9% y-o-y to 10,729 units.

By region:

• In Core Central Region, property sales rose by 13.2% y-o-y to 3,406 units in 2020.
• In the Rest of Central Region, sales rose by 4.3% in 2020 from a year earlier, to 7,069 units.
• In Outside Central Region, sales increased 11.4% y-o-y to 10,434 units over the same period.

Residential construction is slowing

In 2020, there were 10,833 uncompleted private residential units launched in Singapore, down from 11,345 units in 2019, but still up from 8,769 units in 2018 and 6,020 units in 2017, according to URA.

• In CCR, launches increased slightly by 1.8% to 1,545 units in 2020 from a year earlier
• In RCR, launches fell by 8.3% to 4,305 units in 2020 from a year earlier
• In OCR, launches fell by 2% y-o-y to 5,033 units in 2020

Total supply in the pipeline was hardly changed at 49,307 units in Q4 2020 from the same period last year.

• Private residential units under construction rose by 10.3% y-o-y to 42,976 units in Q4 2020.
• Planned development plummeted by 38% to 6,331 units in Q4 2020 from a year earlier.

In Q4 2020, there were a total of 376,040 housing units available in Singapore, up by 0.7% from the same period last year, according to URA. Of which 349,646 units are occupied, while the remaining 26,394 units are available, making up a 7% vacancy rate – up from 6.2% in the previous quarter and 5.5% a year earlier.

Very low interest rates; sluggish mortgage loan growth

Variable interest rate mortgages dominate Singapore’s housing market. Tweaking the rate on mortgages, plus government restrictions on land use and ownership, has helped pre-empt a housing boom despite sharply lower interest rates over 8-9 years.

From June 2020 to December 2020 the average housing loan rate was 2.84%, down from 3.27% from June 2019 to May 2020, according to the Monetary Authority of Singapore (MAS).

Outstanding housing loans rose by a miniscule 0.3% in December 202o from the same period last year, to SG$201.36 billion (US$151.36 billion), based on figures from the MAS.

In Singapore, variable interest rate mortgages are pegged to Singapore inter-bank offered rate (SIBOR). A typical SIBOR-pegged adjustable rate mortgage looks like this:

The mortgage interest rate therefore comprises two parts a) spread or margin b) index, typically the Singapore interbank offered rate (SIBOR).

Yields for high-end units are very low; rents are falling

On the demand side, expatriate arrivals are down, due to combined effects of market-cooling measures, tighter immigration policies, as well as pandemic-related travel restrictions and lockdown measures.

High-end Singapore Centre condominiums yields remain poor, at around 3%, according to Global Property Guide research. Yields are a little higher on smaller apartments than large ones, as is typical in most property markets. Those yields alone would not be a reason for owning property in Singapore.

Rents are falling. In 2020, the rental index of private all-residential properties fell by 0.57% from a year earlier (-0.63% inflation-adjusted), in contrast to y-o-y rises of 1.36% in 2019 and 0.59% in 2018, according to the URA. During the latest quarter, the overall rental index increased by a meager 0.1% q-o-q (but fell by 0.3% when adjusted for inflation).

During 2020, the average rent for landed properties fell by 2.7% while it dropped 0.5% for non-landed properties.

In the luxury market, the Savills basket of high-end non-landed private residential rents fell by 1.9% from SG$4.19 (US$3.15) per sq. ft per month in Q1 2020 to SG$4.11 (US$3.09) per sq. ft in Q3 2020.

“Owing to weak demand for high-end condominiums and private apartments, coupled with increasing vacancies, some landlords have accepted relatively lower off ers from tenants; nevertheless, the rental decline was still moderate,” said Savills.

Rent movements during 2020:

• rents fell by 2.4% y-o-y in Core Central Region
• rents fell slightly by 0.1% y-o-y in the Rest of Central Region
• rents rose by 3% y-o-y in Outside Central Region

The vacancy rate for island-wide completed private residential properties increased to 7% in Q4 2020, up from 6.2% in the previous quarter and 5.5% in the previous year, according to URA.

The pandemic has adversely affected Singapore’s rental market last year.

“The continued spread of the coronavirus has forced many companies to postpone their relocation plans. Therefore, the leasing market is expected to see a significant drop in transaction volume over a short timeframe,” said Savills.

Singapore has a small private rental sector, mostly serving expatriates. In the local sector 81% of all rental units are owned by the HBD. Since 2014 many expatriates have relocated from Core Central Region to suburban and fringe areas in Outside Central Region, according to Joseph Tan, CBRE’s executive director (residential).

99-year leasehold properties have the highest rental yields in Singapore because of their lower prices relative to other types of properties.

Foreign demand is crucial

More than 38% (2.2 million) of Singapore’s population are foreigners, the sixth-highest percentage of foreigners in the world. Of these 9% (o.53 million) are permanent residents, and the remaining 29% (1.7 million) expats, according to the Department of Statistics Singapore.

Tighter immigration rules are being imposed by the government, due to strong popular disquiet. Beginning 1 September 2015 work pass holders need to meet a minimum fixed monthly salary of SG$5,000 (US$ 3,760) to sponsor the stay of their spouse/ children here (on Dependant’s Pass) and a minimum fixed monthly salary of SG$10,000 (US$7,500) to sponsor the stay of their parents here (on Long Term Visit Pass).

Aside from the tighter immigration rules, and the imposition of market-cooling measures, the COVID-19 pandemic has adversely impact demand from foreign homebuyers last year. In 2020, the total number of private houses purchased by foreigners in the country dropped to a 17-year low of just 742 units, according to real estate consultancy firms ERA Realty Network and Orange Tee & Tie. This accounted for only 4.1% of total sales – the lowest in more than two decades.

“For the luxury market, many buyers prefer to physically inspect the premises or visit a show-flat before making a purchase,” said Ms Christine Sun of Orange Tee & Tie. “Last year, many overseas buyers were not able to travel to Singapore to view properties in person which may have resulted in a dip in foreign purchases.”

The Kingsford Hillview Peak, near the Hillview MRT station, and the Cairnhill Nine, located in the Orchard Road district are among the most preferred residential projects among PRs and foreign homebuyers. Other top selling projects amongst PRs and foreigners in Q4 2019 include Parc Esta, Parc Clematis, Jadescape, Maria One Residences, Martin Modern and The Crest.

Mainland Chinese buyers, Malaysians, Qataris, Indonesians, Americans and Indians make up the largest groups of non-Singaporean homebuyers in the country.

Singapore citizens and Singapore Permanent Residents pay a lower additional buyer’s stamp duty on residential property acquisitions than foreigners, depending on the number of properties owned. For Singapore citizens and Singapore Permanent Residents, the maximum rate of additional buyer seller duty is 15%. For foreigners it is a flat rate of 20%.

US citizens are however treated the same as Singapore citizens under the US-Singapore Free Trade Agreement, that is, no additional buyer’s stamp duty is payable on the first Singapore residential property purchase.

Economic contraction

Singapore’s economy contracted by 5.8% in 2020 from a year earlier, following a y-o-y growth of 0.7% in 2019, according to advance estimates released by the Ministry of Trade and Industry (MTI). The economy grew by an average of 5.3% annually from 2010 to 2018.

During 2020:

• Manufacturing expanded by 7.1%, following a 1.4% fall in 2019
• Construction fell by a whopping 33.7%, in contrast to a 2.8% growth in 2019
• Services fell by 7.8%, following a 1.1% increase in the prior year

The economy is expected to grow by 5% this year and by another 2.6% in 2022, according to the International Monetary Fund (IMF).

Despite a widespread expectation that the economy will gradually improve this year, the outlook remains uncertain. “Notwithstanding the shift to Phase 3 of reopening, further recovery in domestic demand would likely be constrained by the continued weakness in tourism, and large labour market slack. We also keep a close eye on possible renewed infection waves in the community, which could halt or even reverse the reopening process,” said Citi economists Kit Wei Zheng and Ang Kai Wei.

Unemployment was 3.2% in Q4 2020, an improvement from the previous quarter’s 3.6% but remains far higher than the prior year’s 2.3%, according to the Ministry of Manpower (MOM). Unemployment among Singaporeans was 4.5% in Q4 2020, up from 3.3% a year earlier. Similarly, the jobless rate among PRs rose to 4.4%, from 3.2% in Q4 2019.

Headline inflation was -0.2% in 2020, down from 0.6% a year earlier, according to Statistics Singapore. Core inflation also declined to -0.2% last year, from 1% in 2019.

In October 2020, the country’s central bank, the Monetary Authority of Singapore (MAS), retained the rate of appreciation of the S$NEER policy band at 0% per year to boost economic activity.

“In its April 2020 Monetary Policy Statement (MPS), MAS set the rate of appreciation of the S$NEER policy band at zero percent per annum, starting at the then-prevailing level of the S$NEER. There was no change to the width of the policy band,” said MAS. “This policy stance was assessed to be appropriate given the deterioration in economic conditions and weaker inflation outlook, and aimed to complement fiscal, liquidity and financial policies in supporting the economy through the COVID-19 downturn.”

The average exchange rate in December 2020 was USD1 = SGD1.3325, a slight appreciation from USD1 = SGD1.3567 a year ago.

Sources:

• Release of 4th Quarter 2020 real estate statistics (Urban Redevelopment Authority): https://www.ura.gov.sg/Corporate/Media-Room/Media-Releases/pr21-02
• Number of new sale, sub-sale and resale transactions for private residential units by market segment (Urban Redevelopment Authority): https://www.ura.gov.sg/-/media/Corporate/Media-Room/2021/Jan/pr21-02d.pdf
• Stock & Vacancy and Supply in the Pipeline as at End of 4th Quarter 2020 (Urban Redevelopment Authority): https://www.ura.gov.sg/-/media/Corporate/Media-Room/2021/Jan/pr21-02e1.pdf
• Prices and Price Indices (Statistics Singapore): https://www.singstat.gov.sg/find-data/search-by-theme/economy/prices-and-price-indices/latest-data
• Look Ahead 2021: Defying a pandemic-induced downturn, property market set for more gains (Today): https://www.todayonline.com/singapore/look-ahead-2021-after-surprisingly-good-pandemic-year-property-market-set-more-gains
• Interest Rates of Banks and Finance Companies (Monetary Authority of Singapore): https://secure.mas.gov.sg/msb/InterestRatesOfBanksAndFinanceCompanies.aspx
• Data on Housing and Bridging Loans (Monetary Authority of Singapore): https://www.mas.gov.sg/-/media/MAS/Statistics/Monthly-Statistical-Bulletin/Housing-Loans_Q4-2020.pdf?la=en&hash=6BF53AD669827FFA2B5535CFF67929ABEB81C493
• Table I.5A Banks: Loans and Advances of DBUs to Non-Bank Customers by Industry (Monetary Authority of Singapore): https://eservices.mas.gov.sg/statistics/msb-xml/Report.aspx?tableSetID=I&tableID=I.5A
• Singapore Residential Sales Briefing Q3 2020 (Savills): https://pdf.savills.asia/asia-pacific-research/singapore-research/singapore-residential/sg-residential-sales-briefing-q32020.pdf
• Singapore Residential Leasing Briefing Q3 2020 (Savills): https://pdf.savills.asia/asia-pacific-research/singapore-research/singapore-residential/sg-residential-leasing-briefing-q3-2020.pdf
• Number of Uncompleted Private Residential Units Launched in the Quarter by Market Segment (Urban Redevelopment Authority): https://www.ura.gov.sg/-/media/Corporate/Media-Room/2021/Jan/pr21-02c1.pdf
• Talk intensifies of more private property cooling measures after comments by ministers (The Straits Times): https://www.straitstimes.com/business/property/singapore-may-act-to-cool-rising-home-prices-analysts-say
• Temporary Relief Measures for Property Sector due to Coronavirus Disease 2019 (COVID-19) Pandemic (Ministry of National Development): https://www.mnd.gov.sg/newsroom/press-releases/view/temporary-relief-measures-for-property-sector-due-to-coronavirus-disease-2019-(covid-19)-pandemic
• Singapore Property Market Cooling Measures (SRX): https://www.srx.com.sg/cooling-measures
• World Economic Outlook Database, October 2020 (International Monetary Fund): https://www.imf.org/en/Publications/SPROLLS/world-economic-outlook-databases#sort=%40imfdate%20descending
• You wouldn’t own a Singapore condominium for rental yields! (Global Property Guide): https://www.globalpropertyguide.com/Asia/Singapore/Rental-Yields
• Population and Population Structure (Statistics Singapore): https://www.singstat.gov.sg/find-data/search-by-theme/population/population-and-population-structure/latest-data
• Singapore economy shrinks 5.8% in 2020 after contraction eases to 3.8% in Q4: Flash data (The Straits Times): https://www.straitstimes.com/business/economy/singapore-economy-shrinks-58-in-2020-after-contraction-eases-to-38-in-q4-flash-data
• Singapore GDP shrinks 5.8% in 2020; contraction slowed in Q4 (The Business Times): https://www.businesstimes.com.sg/government-economy/singapore-gdp-shrinks-58-in-2020-contraction-slowed-in-q4
• Summary Table: Unemployment (Ministry of Manpower): https://stats.mom.gov.sg/Pages/Unemployment-Summary-Table.aspx
• Singapore Consumer Price Index (CPI) (Statistics Singapore): https://www.singstat.gov.sg/modules/infographics/consumer-price-index
• Singapore core consumer prices fall further in December, but headline inflation flat (The Business Times): https://www.businesstimes.com.sg/government-economy/singapore-core-consumer-prices-fall-further-in-december-but-headline-inflation
• MAS Monetary Policy Statement - October 2020 (Monetary Authority of Singapore): https://www.mas.gov.sg/news/monetary-policy-statements/2020/mas-monetary-policy-statement-14oct20
• Foreign buying of Singapore private homes drops to 17-year low in 2020 (The Straits Times): https://www.straitstimes.com/business/property/foreign-buying-of-singapore-private-homes-drops-to-17-year-low-in-2020