Singapore private home sales rise the most in more than two years on pent up demand, but rebound likely to fizzle out

Sales of private homes in Singapore in September rose by most in more than two years amid pent-up demand, a low-interest rate environment and unprecedented stimulus measures, but analysts expect demand to gradually peter out.

Developers sold 1,329 new private dwellings, excluding government-subsidised flats, last month, the highest since July 2018 when 1,724 units were sold after fresh cooling measures spurred buyers to enter the market, government data showed.

September's home sales rose by 5.6 per cent from August, and were 4.6 per cent higher compared to a year ago. It was also the fifth straight month of increase in sales after transaction volume plunged in April following the implementation of lockdown measures to stem the spread of Covid-19.

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In the first nine months, developers sold 7,532 new homes, surpassing the 7,469 units sold a year earlier.

The Southeast Asian nation began implementing restrictive measures in April for two months to contain the pandemic, gradually restarting economic activities. To support the economy, the government pumped more than S$100 billion (US$73 billion) of stimulus. As a result its economy shrunk more slowly at 7.0 per cent in the third quarter compared to the 13.3 per cent contraction in the previous quarter, according to the Ministry of Trade and Industry.

"New home sales, backed by robust demand, have outperformed expectations time and again in recent months," said Ismail Gafoor, CEO of PropNex, a listed property agency in Singapore.

The market is particularly supported by "a sizeable pool of genuine buyers [and] investors with ready funds, helped by a low-interest rate environment," he added.

The increase in sales was also matched by a quarter on quarter gain of 0.8 per cent in home prices in the July to September period, bringing prices back to its peak seen in the third quarter last year, according to Cushman & Wakefield.

"The resilience of prices is a reflection of strong underlying demand for Singapore private residential properties and strong holding power due to unprecedented government stimulus supporting the economy," said Wong Xian Yang, associate director of research for Singapore and Southeast Asia at the property consultancy.

Other market observers, however, said that the rebound is unlikely to be sustained in the coming months.

"The spike in new home sales in recent months should be seen in the context of sales playing catch up after the initial three months of lockdown," said Alan Cheong, executive director, research and consultancy at Savills Singapore. "We would expect new sales numbers to settle down at a more sustainable 400 to 500 unit range on a monthly basis."

Tricia Song, head of research for Singapore at Colliers, agreed, saying that the property market was not out of the woods as yet as "there are still risks of another infection wave locally and globally, and a more severe global downturn".

Given the market rebound, prices however are likely to be flat for the year, compared to their initial estimate of a 5 per cent decline, Song said.

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.