Singapore home prices set for first decline since 2016 as economic recession bites, Colliers says

Skyscrapers stand beyond traditional shophouses in the central business district in Singapore. Photo: Bloomberg

(Apr 28): Singapore's home prices are poised to fall for the first time in four years as the global coronavirus pandemic is likely to push the city state's economy into a recession, according to Colliers International.

Prices could decline by as much as 3 per cent this year, the property consultancy said, based on an index of new and existing properties tracked by Urban Redevelopment Authority (URA). The expected drop is the first setback since 2016, though not the steepest in the past decade, it said.

Singapore last week unveiled a $48 billion stimulus package to counter the slowdown triggered by the pandemic, with the government downgrading its economic forecasts to a contraction of between 1 and 4 per cent for 2020. The economy shrank 10.6 per cent in the first quarter, the worst in a decade.

"With the downward revision of GDP (gross domestic product) growth in 2020, we now expect property prices to decline by one to three per cent," said Tricia Song, head of research for Singapore at Colliers. "We are likely to go into a recession."

Singapore's open economy has not escaped the impact of a pandemic in which industries such as aviation and tourism have been slammed by travel restrictions. Many of the city's businesses that rely on China for growth are hardest hit as supply chains were disrupted and manufacturing slumped amid lockdowns.

Singapore's private residential market was worth about $35 billion in 2019, based on more than 19,000 units sold, including land and non-landed homes and so-called executive condominiums. About 41 per cent came from primary sales and the rest from secondary market transactions.

Savills may revise its forecast for a 3 to 5 per cent increase in property prices this year, should the pandemic continue and sentiments remain bearish, according to Alan Cheong, head of Singapore's research and consultancy.

"We may lower our forecast, but just marginally to zero to one per cent growth, year-on-year," he said. The travel lockdowns and other preventive measures may disrupt launch dates of new projects."

This year's volume could fall to 8,000 units as demand wanes and investors batten down the hatches, Song estimates, making it the lowest since 7,972 units were recorded in 2016. Last year, developers sold 9,912 units when home prices climbed 2.7 per cent.

Despite the dire economic outlook, there is also still room for the government to ease measures to support home prices, should there be a hard landing, Song at Colliers said. Singapore's market-cooling measures in recent years have helped rein in speculation, keeping price gains at sustainable levels.

Overall, some 1,854 units were sold in February, versus 1,332 units in January, according to Colliers, citing government data. That is twice the volume in February 2019. Sales in March could offer a better gauge of market sentiment given the worsening pandemic.

"How new launches perform from this month onwards will give us a sign as to whether sentiments are holding or weakening," said Cheong at Savills. There could be opportunities to pick up bargains as real estate may prove to be an attractive asset to eroding financial assets.

"We believe that investors these days are getting jaded by financial products and would prefer to buy something that they have ownership of ultimately," Cheong added. "Real estate fits the bill. This behaviour should continue only if there is no breakdown in market sentiments."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.