House-hunting in a pandemic

What's on the horizon for those in the market for a new home?

Corinne Kerk

The property market has been hit by different negative events before — but never anything like the Covid-19 pandemic.

Like global cities trying to break the virus’ transmission, Singapore adopted a circuit breaker set of safe distancing measures from April 7 to June 1, among them the suspension of in-person activities such as real estate services.

With showflats shuttered and physical property viewings ruled out, transaction volumes took a beating — sales of new private homes in April fell 58 per cent from March.

Still, market watchers are not pushing the panic button, because new private home sales surged 75.5 per cent in May over April.

“The damage to the residential property market is not expected to be severe or lasting — mainly thanks to the various rounds of cooling measures since 2001 which have worked to keep the market grounded,” says Karamjit Singh, property veteran and chief executive officer of property portal Showsuite.

“Recognising the disruptions in timelines caused by Covid-19, the government also introduced temporary relief measures for property developers and certain groups of Singaporean homebuyers.”

Developers now enjoy a time extension to sell down inventory, while existing property owners may restructure bank loan repayments. Further, Singaporean married couples looking to sell their first matrimonial home to qualify for Additional Buyer’s Stamp Duty (ABSD) remission after purchasing a replacement matrimonial home have been granted an additional six-month leeway.

The economic impact of the Covid-19 pandemic is different from, say, that of the 2008 global financial crisis, notes Nicholas Mak, ERA Realty’s head of research and consultancy.

“Global financial and banking systems are intact,” he states. “Public confidence in the banking and financial systems are intact. And none of the central banks in any developed economy had to bail out banks or financial institutions.”

He adds that a temporary slowdown in property sales is expected, but as long as the financial capability or purchasing power of home buyers is not severely compromised, house-buying demand will bounce back when the pandemic is contained.

The number of new private housing units (excluding executive condominiums) launched and sold month-on-month fell in March, but the take-up rate — the ratio of units sold to those launched — still exceeded 100 per cent, indicating healthy underlying demand.

In fact, the take-up rate has remained above 100 per cent for the last six consecutive months till March — something not seen since the market recovery from mid-2017 to mid-2018, says Mr Mak, adding that the longer the circuit breaker, the greater the pent-up demand.

Time to buy?

While some property hunters have postponed their purchase decisions, PropNex Realty’s chief executive officer Ismail Gafoor reckons this is a good time to buy. Developers are more sensitive with pricing, and sellers in the resale market are realistic in their asking prices.

However, do not expect a huge drop in prices,since developers have already committed high prices for land bids. He says: “Prices are expected to remain relatively stable. If at all, we expect a correction (for all of 2020) to the tune of two to three per cent at most.”

He adds that interest rates are lower, translating to lower monthly instalments and substantial savings on interest payments.

Meanwhile, Ken Low, managing partner at Singapore Realtors Inc (SRI) says buyers should take a longer view beyond the current situation and not be “caught by surprise” — citing China’s housing market which saw strong sales in March as sales offices reopened across the country following a nationwide shutdown.

He argues that firstly, recovery from the pandemic is imminent, as every property market trough has been higher than previous troughs. Secondly, the opportunity for low entry prices is already present because sellers, including developers, are facing competition from the current supply.

Finally, while there may be some 40 property launches to choose from this year, he expects new supply in 2021 to be half of this year’s, thereby leading to a price increase.

“When the circuit breaker was over, half the year was gone,” he points out. “When you enter 2021, there may be a herd instinct of people buying what is in the market, pushing prices up.”

Making sure you're ready

In the market for a new home? SRI’s Mr Low advises getting into the position of a ready buyer — a process that takes time and consideration of issues like the ABSD and Total Debt Servicing Ratio.

He says: “Upgraders or existing homeowners may want to sell their current properties, or enter into a part purchase agreement to prepare themselves for the next purchase.”

Part purchase refers to the transfer of all the shares of one owner of a private property to the other co-owner, freeing himself or herself up to purchase another.

Buyers should also dive deeper into their requirements — such as location, budget, housing type and buying intention — and inform their agents accordingly, so the latter can look out for buying opportunities, including distressed sales.

Timely solutions have been created in the new era of social distancing; developers and property agents use webinars and virtual tours via video calls to walk buyers through market options.

So explore and shortlist the projects you like, from the comfort of your home. For instance, you can visualise new homes in uncompleted projects via property portal Showsuite’s interactive technology, with features such as 3D coloured floor plans, drone views at storeys, and virtual walkthroughs of showflats.

However, Mr Singh notes: “Real estate is all about location. If the situation allows for it, it’s best for buyers to visit the actual site and walk around it to get a sense of its surroundings.”

And last but not least, buyers “have to ascertain that they are financially ready and able to hold on to the property long term to service their mortgage, especially in periods where rental is affected”, says PropNex’s Mr Ismail.

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