Singapore Property Prices Going Up
What is happening and what can you do about it?
Today’s the 15th of June. It is the 2nd day of the heightened phase 2 lockdown. So we are going to review what happened during the past 1 month. At our end, we are observing Singapore property prices going up.
Singapore Landed Property Prices Going Up
The first article we wish to share is this article from EdgeProp, “Bungalow deals turbo-charged by new generation of business titans”. A lot of Good Class Bungalows (GCB) have been sold. There were two recent transactions at 48 million and another two more at 44.3 million and 29 million. Very impressive. The article mentioned that during this lockdown, landed property prices went up and broke records.
They do not include condos or HDB. I think a lot of our audience and readers hear about the rising costs of condos and HDB. But even landed property prices are breaking the sales records.
There was also an amusing comment from an interviewee. Let me share with you what he said here:
Last year’s enforced Circuit Breaker (CB) and the ongoing restrictions to curb the spread of Covid have heightened the awareness of the fragility of life, as well as the importance of striking a balance between business building, wealth creation and strengthening family ties. The purpose of wealth creation is to enhance one’s quality of life, and that of the family and Covid-19 has really brought home that message to the ultra-rich.
This propels them to buy landed property or GCBs for them and their family. It’s a world of difference. If I’m stressed and I need to relief, I might just go Shopee or Lazada to buy something, but they just buy GCB. That amuses me.
Difference between bungalow and GCB
Just to help viewers and readers to understand the difference between bungalow and Good Class Bungalow (GCB).
Just some quick facts. In Singapore, under the URA data, there are about:
- 40,132 Terrace Houses
- 22,268 Semi-Detached Houses
- 10,855 Detached Houses or Bungalows
- Out of the 10,000 Bungalows, 2,500 are Good Class Bungalows
The technical difference that separates GCBs from other bungalows is the minimum size. A GCB must occupy at least 1400 sqm. That is why GCBs are very rare. You need to wait for crises before the opportunity to buy comes up. Because GCBs are owned by the ultra-rich, the premium, those who have been there, done that. If not for crises like this, we don’t think they will want to let go.
Who are the GCB Buyers?
In 2019, there were only 3 GCB deals. In 2020, there were 11 deals. For this year, we already have 9 deals as of May 2021. We are set to break the record for the number of deals again this year.
So who are the buyers? This article mentions that they are new multi-millionaires in finance, trading, tech & pharmaceutical sectors. They are generally younger, in their 30s to 40s. Some of them are naturalised citizens, buying for their own use. An interesting point is that the interest is coming from a family office. What is a family office? I will explain it to you in awhile.
Some quick thoughts, in a crisis. there will be industries and people who will suffer more. Airlines and tourism will suffer. On the other hand, this is also an opportunity for a lot of new industries, such as tech and pharmaceuticals.
From this graph, we can see that the average price of landed property has broken the record. The average price of the property, including Sentosa Cove, has reached a new height of $1,433 psf. The previous high was in 2013 at $1,367 psf. We expect that the price per square foot will be lower for bigger bungalows. A five-bedroom psf should be lower than the psf for a 3-bedroom.
But it doesn’t work for GCB. Although GCB is bigger, the price PSF is also higher. Take a look at the graph for the GCB market:
The average price right now is about $1,653 psf as at May 2021. The last peak was in 2018 at $1,535 psf.
What is a Family Office?
From ground experience, we once met a few clients from China. They were the ones who taught and shared this concept about Family Office. The term is called Single Family Office. A lot of rich families from Asia, such as India and China, have set up family offices in Singapore. They will pump in a certain amount of funds and it will be allowed to do your investments. It could be investment equities, properties, etc.
The term ‘single family office’ (SFO) is not defined under the Securities & Futures Act (SFA). An SFO typically refers to an entity which manages assets for on behalf of only one family and is wholly owned or controlled by members of the same family. The term ‘family’ in this context may refer to individuals who are lineal descendants from a single ancestor, as well as spouses, ex-spouses, adopted children and step children of these individuals.
If you are a rich tycoon and you like Singapore, you can set up a fund to invest in. So why are they doing this? Besides the fact that Singapore is stable and safe, they can also apply for work passes and PR. They can have a foothold or a base in Singapore, for the family.
During COVID, it is pushing the world to two extremes. Those who manage the economy well and put the virus under control. On the other extreme, we see the virus rampaging across the whole country. That’s why we hear a lot of sad stories from India. My take is that the virus won’t go that quickly. It will come back and there will be more variants.
So if I am well to do in South East Asia, there are only a few places that managed the virus well. One of them is Singapore. If I am rich, I will park some money here. The family office fund is something that attracts me. Locals here get free vaccines. Isn’t that a testament to how well the Government is doing?
Another point to note is the decoupling of US and China. Because of this, more China firms are coming here to set up their office. This includes Tencent, Alibaba, Lazada and Bytedance. The rich will be buying bungalows and penthouses.
Singapore Condominium Prices Going Up
A recent article from The Business Times, said that there are “Fewer viewings amid heightened alert drive 11.4% fall in condo resale volumes in May”.
Although there were fewer viewings in May, the prices rose by 0.9%. The prices will likely increase even more if there is no phase 2 heightened alert.
Here’s another article from The Straits Times. Compared to last year during the April lockdown, the volume of viewings dropped by 57%. This time round, the volume just dropped by about 11.4%. So it’s likely that people are used to online viewings.
HDB Property Prices Going Up
This is another article from The Business Times on the 27 April, “HDB upgraders are fuelling mass-market condominium sales”. Condominiums are still selling, so who are the condo buyers? From this article, we can see they are the HDB upgraders.
A lot of upgraders sold their HDB and they went on to buy a condo. There are so many sales because the market is good now. They are enjoying a cash-over-valuation (COV). For a four-room HDB unit, a COV of $10,000 to $30,000 is not surprising. For five-room, Executive Mansionette (EM) and above, $30,000 to $50,000 above valuation is not uncommon.
Some of these owners are also selling. They do not mind renting meanwhile. This is a good market to sell and then buy back later when the market cools down. Not only are these sellers turning to resale, but they are also looking at condominium new launches.
Who are the buyers for HDB resale?
This article mentioned that first-time buyers tend to buy BTO. But because of construction delays, they are turning their attention towards resale HDB flats, because it is faster. COVID has introduced a lot of delays and they are not sure when they will be completed.
So we see first-time buyers buying HDB resale. HDB sellers will be upgrading to a mass condo. Mass condo might upgrade to a better condo and all the way to a GCB itself. It all starts with first-time homeowners.
Another highlight from the article is that if Singapore employment conditions do not change, HDB resale volume is likely to be more active. In Singapore, a lot of white collars who do well, prefer to work from home. These people are not affected. The blue-collar workers, however, do not have such a choice. You have to be at the factory or shops. That is why white-collar workers are looking at upgrading, so they can have a more conducive environment to work from home or to cater for children’s home-based learning.
This is a second article on 4th of June. “HDB resale prices climb in May for the 11th straight month, says SRX”. That is almost 1 year of continuous rising. A few key numbers to note include:
- Resale price climbed for the 11th straight month
- Prices for all room types grew between 11.3% to 13.7%
- Prices grew at matured towns and non-matured towns
- Non-matured estates increased more than matured estates
An interesting point to note is that everything is increasing. Not just properties. So we are facing inflation and life just got harder.
Property Rental Prices Going Up
Yes, the rental prices for condominiums and HDBs are rising. I was thinking that there are lesser foreigners coming in. Shouldn’t there be more empty condos or HDB flats? Right now, rental demand is quite high. Rental flats get rented out very quickly. Sometimes within weeks without physical viewing. More tenants are willing to view online.
This article was published by The Business Times on 9th June. The title is, “HDB rents up 0.7% in May, condominium rents rise 0.3%:SRX”. The amount didn’t rise by a lot, but it is still rising. The key highlight for this article is that there are lesser foreigners. However, a lot of owners are capitalizing on rising resale prices. So some of them are selling and renting.
Some of them could also be affected by the OTP reissue ban. You have to sell your current HDB or property first before you can buy. If not, you will be slapped with Additional Buyers Stamp Duty (ABSD).
Do you think Singapore property prices will continue rising?
There’s a lot of GDP and economic growth. With the low interest rates, a lot of people who aren’t affected by COVID will take this opportunity to buy more. Looking at all angles, these buying and renting activities are still going to continue for a while.
You will have to assess your personal situation, such as your job security, income and all. If you need further help, give us a call or contact us with the form below.
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