The COVID-19 pandemic has caused a massive impact on the world’s economy. Businesses of various industries are on the hunt for effective techniques and strategies to stay in the competition. Given the current situation, property owners, potential buyers and sellers, as well as property investors in Singapore are now asking: will the COVID-19 also affect the real estate market?
How the Real Estate Market Reacts to COVID-19 Pandemic
According to an article released by The Straits Time Singapore in April 2020, the country’s property market has felt the huge impact of COVID-19 as quarterly private home prices declined for the first time in a year. The Urban Redevelopment Authority (URA) said that prices of private residential properties dropped 1.2% in the first three months of the year. However, market watchers are not expecting a major downfall in prices moving forward but the long-term implications still depend on how long the crisis will last.
Although the COVID-19 pandemic has resulted in minor changes in purchase conclusions, property demands specifically for residential housing will not significantly change as the excess in demand still exists.
Real Estate Market: Residential Market
While the business districts and the streets of the Lion City were all soundless during the part of its circuit-breaker to fight the spread of COVID-19, the country’s residential market was staying afloat. According to the South China Morning Post, 1,320 units were sold in April and May 2020 despite the city’s partial lockdown. This accounts for almost 40% of the closed transactions in the same period last year. Thanks to online tours and virtual viewings, most buyers made up their minds without the need to see the actual homes.
Another reason that proves the continuous growth of Singapore’s residential market is the value of the units sold. Frankly, they weren’t cheap. The Urban Redevelopment Authority’s Real Estate Information System (Realis) listed one of the most expensive transactions in June 2020. It was an 8,740 sq ft condominium unit in Ardmore Park located in Central Singapore. The unit was sold for a whopping S$27.65 million.
Real Estate Market: Rental Market
Despite the COVID-19 pandemic, Singapore will remain to be one of the top investment destinations in Asia. Known for its economic and political stability, Singapore has been home to many investors. Furthermore, the Lion City has been popularly known for its ability to recover from various economic crises it has faced in the previous years.
Given the government’s quick intervention, Singapore has lessened the spread of COVID-19 outbreak. However, even such efforts were not enough to stop the rental market from declining. Among the list of factors affecting the rental transactions is the collapse of global aviation and the reduction of various economic activities.
The silver lining in this situation, however, is the rise in resale volume earlier this year. An increase in rental transactions has been seen from 20,703 in the last quarter of 2019, to 21,191 units in the first quarter of 2020.
Real Estate Market: Commercial Market
Every business of all kinds has felt the impact of COVID-19 pandemic. But it’s different for commercial real estate. The commercial market has suffered the most since this crisis started specifically hotels, restaurants and retail stores.
Travel restrictions imposed by most countries have restricted visitors to enter Singapore, resulting in a major fall in tourism. In addition, more and more residents have been limiting themselves from going to shopping malls.
According to World Property Journal, renowned tourist destinations and establishments in Singapore including Chinatown have announced that sales are dropping by as much as 80% in February of 2020. In the same month, some businesses in Jewel Changi Airport have also felt the same impact with a loss of 70% in retail sales.
Real Estate Market: Office Market
With the increasing number of COVID-19 cases, more and more businesses are switching to remote working. Most Singapore-based workers haven’t seen their colleagues since the pandemic started. Sadly, this might be the new setup people have to be familiar with for a bit longer. With more than 80% of Singapore workforce telecommuting today, it’s safe to say that COVID-19 is gradually reshaping the office property market.
As the Lion City entered its circuit breaker from April to July of 2020, Colliers International has noted the declines in rental transactions in the second quarter of this year. Vacancy for average CBD Grade A has increased from 3.1% in Q1 to 4.6% in Q2.
Given that most businesses have closed temporarily due to Singapore’s circuit breaker, market watchers are expecting a rise in office vacancy as the year passes by. With more firms turning into remote working setup, many businesses may soon realise the need to reduce their office footprints.