January 7, 2021

A much improved market sentiment and rising consumer confidence have helped to boost home values in Q4 2020. This came on the back of fresh optimism around the Singapore economy returning to growth in 2021, Covid-19 vaccine hopes, the effective containment of the pandemic, and further re-opening of business and social activities.

Initial estimates from the Urban Redevelopment Authority (URA) showed that overall private home prices rose by 2.1 per cent in Q4 2020. This is the highest quarterly increase since Q2 2018 when prices rose by 3.4 per cent.

Taken together, private residential property prices have risen by 2.2 per cent in the full-year 2020, marking the fourth straight year of price increase. Based on the Q4 2020 flash estimate, the URA private residential property index (with a reading of 157 points) is now about 1.6 per cent above the recent peak in Q3 2013 (154.6 points).

The price increase in Q4 2020 was led by the surge in home values for non-landed private residential properties, which rose by 3.2 per cent over the previous quarter. Non-landed home prices rose across the board in Q4 2020, with the Rest of Central Region (RCR) seeing the sharpest rise of 4.8 per cent—likely supported by several new launched in this sub-market during the quarter. Meanwhile, the Core Central Region (CCR) registered a price growth of 3.3 per cent and home values in Outside Central Region (OCR) climbed by 1.7 per cent in Q4 2020, according to the flash estimate.

Ismail Gafoor, CEO of PropNex, said, “Looking at the numbers, I would say the residential property market – both public and private housing—turned in a blockbuster performance in Q4 2020 given all the challenges amid the global pandemic and the economic downturn. We believe the property market has emerged relatively unscathed in this crisis thanks to the various rounds of cooling measures which have eradicated real estate speculation and encouraged households to be more prudent in their property purchase.

We saw the sales momentum and price resilience in Q3 2020 carrying through to the final quarter of the year, as market sentiment and consumer confidence picked up steadily. In Q4 2020, market confidence got a shot in the arm on prospects of the phase 3 re-opening as well as positive news around Covid-19 vaccines. In addition, there is also a growing sense of optimism amid the gradually recovering economy and successful containment of the pandemic in Singapore.

According to URA, overall private home prices rose by 2.1 per cent in Q4 2020 and 2.2 per cent for the whole of 2020, which is slightly better than our forecast. We expect that home values should continue to inch up in 2021 by 2 per cent to 3 per cent, given the improving market outlook and diminishing supply of units. In addition, with the firm land price for sites and higher construction cost, there is little headroom for developers to cut prices.

In general, we think developers have got their pricing strategy on-point in 2020 and this has helped to ensure that their projects remain appealing to price-sensitive buyers; in fact, it has enticed many buyers to enter the market, with several new launches achieving stellar sales on their launch weekend—The Linq At Beauty World was practically sold-out, while Clavon sold 70 per cent of its units, for example.

Moving forward, we expect the sales momentum of private homes to remain intact, backed by the ample liquidity in the market as well as the benign interest rate environment. In addition, we could potentially see more foreign buyers returning to the market should there be any further easing of travel restrictions. We anticipate that 8,000 to 9,000 new private homes could be sold in 2021—slightly lower than the 9,793 units sold in 2020 based on Realis data. The lower sales forecast for 2021 is mainly due to fewer large developments that will be launched this year, as most of the mega projects have already been progressively put on the market in 2017 and 2018.”

The flash estimate released by the Housing and Development Board (HDB) showed that resale prices of public housing flats rose by 2.9 per cent in Q4 2020. This is the steepest quarterly increase in the HDB resale price index in over nine years, since the 3.8 per cent price growth achieved in Q3 2011.

For the whole of 2020, HDB resale prices climbed by 4.8 per cent, posting the largest annual price growth since 2012, where resale flat values rose by 6.5 per cent.

Wong Siew Ying, Head of Research and Content, PropNex, said, “The HDB resale market continued its stunning recovery, with resale prices climbing by 2.9 per cent in Q4 2020, according to the flash estimate from the HDB. This is the highest quarterly price growth since Q3 2011 and it has helped to push HDB resale prices up by 4.8 per cent for the full-year 2020. The increase in resale flat values in 2020—supported by healthy owner occupier demand—marked the second straight year of price growth in the HDB resale market following the 0.1 per cent rise in 2019. We believe HDB resale prices could see further growth of 2 to 4 per cent in 2021, given the anticipated higher demand.

The HDB resale volume will likely exceed 23,000 units in 2020 and we expect transactions to increase by 3 per cent to about 24,000 units in 2021. Factors that will help to drive demand for resale flats include the affordability of resale flats (with up to $160,000 in housing grants for first-timers) and the delays in the completion of new HDB flats channelling buyers with more immediate housing needs to the resale market. In addition, with the ongoing global pandemic and macroeconomic uncertainties, some buyers may want to exercise financial prudence by opting HDB flats rather than costlier private homes.

The HDB resale market could benefit from both the upgraders and downgraders segments – those who are upgrading to a bigger flat as the family size grows or need a more spacious home due to telecommuting arrangements. Meanwhile, some buyers may be downgrading from private residential properties to HDB flats amid the weak job market and employment outlook.”