Does Covid-19 Make A Good Time To Buy A Property?

Updated: Nov 18, 2020

Wondering what's driving the property market despite the pandemic?

With the Covid-19 situation right now and the month long circuit breaker imposed by the government, things may seem overwhelming right now. Our lifestyle has changed and we are all adapting to this new norm. Despite that, however strange it might seem, it is actually a good time to invest/buy a property in Singapore now. Think of this as a profit-making opportunity to invest in the real estate market. Why you ask? Read on as we explain why.

2020: A buyer's market

The Straits Times reported that private property prices are seeing a 1.2% drop in Q1 2020. Private home prices have been rising up since 2018 cooling measures up till the recent drop in Q1 2020.

"Singapore's property market caught its first chill from the coronavirus with quarterly private home prices declining for the first time in a year, but market watchers said they are not expecting a sharp fall in prices going forward." - The Straits Times

However, The Business Times reported on Jan 2020 that in 2019, new home sales topped 10,000 units, a 15% from 2018.

"Singapore PRIVATE home sales in 2019 rose 15 per cent to 10,104 units - signalling a resilient housing market as unemployment remained low, despite an expectedly slow month in December." - The Business Times

Source: The Business Times

Some may hold back their plan in upgrading or to buy a second property for investment as a saving plan, which we will share in our next article on How to create Saving Plan even if the prices don't go up.

Despite the virus, we have noticed a surge in the Central Core Region (CCR). Private new home sales in the CCR increased by 191.7% in Q1 2020 despite uncertainty in the property market. But why are buyers still entering the market? Are these buyers/investors not afraid of the crisis? Or did these buyers/investors see an opportunity?

Did you know prices were at its highest peak of $3014psf in Q2 2019 which have now dropped to an average of $2540psf in Q1 2020?

"However, on a yearly comparison, there was an exponential increase in volume of CCR transactions between 1Q2019 and 1Q2020. It had a 191.7% (y-o-y) increase in number of sales in the CCR segment." - PropNex Research

Advancement of technology

Ever since the circuit breaker started on 7th April, developers have been asked to close their show flats as it is considered a non-essential service. Developers have now resorted to using technology to showcase their sales galleries to prospective buyers through virtual tours, doing online balloting and accepting e-applications.

Developer show flats were shown through virtual show flat tours and zoom meetings. Now, you may be wondering, is this the new normal? Would this be a new way of buying properties in the future? Think about it. Imagine removing the ID treatment in show flats, don't they look pretty similar? Shouldn't figures and prices of these units supersede the ID treatment (which you probably would not get unless you pay more for it)? Isn't buying a property at the right price more important?

Entering the market at the right price plays a part in how much you will profit when you eventually sell your property.

*Despite the challenge of being unable to view the show flats, developers have sold a total of 277 private new homes in the month of April. - Straits Times

**Update: Show flats will remain closed after 1st of June until further notice.

Buy when the market isn't looking too good? (e.g. VIRUS)

Despite how tough the circuit breaker is and how overwhelming things are happening around the world, things will eventually get better with time. But for now, we will have to get used to this new normal of buying and selling properties online.  

However, some buyers might say, "I will wait till Covid-19 is over."

But what are the consequences if you were to wait till after Covid-19?

In 2019, private new home sales saw a sales volume of 10,000 units. Assuming in 2020, sales dropped to 5,000 units, does that mean those 5,000 buyers who wanted to buy decided to cancel their plan or postpone their plan?

Assuming in 2021, the Covid-19 is over, these 5,000 buyers who deferred from buying a property in 2020 plus another 10,000 new buyers in 2021, that would make 15,000 buyers in 2021.

This results in an increased demand of 50% in 2021. Think of it this way. If developers see an increase in demand, do you think developers will choose to reduce or increase prices?

Buying when the market is going downhill has proven to be a time for good investment. Developers will price their units sensitively and are generally more willing to reduce prices. One developer has reduced prices by $200K-300K as compared to the initial launch.

As seen from the above chart, buyers who have made the call to purchase a property during the SARS crisis and the Global Financial Crisis, have already reaped in the profits made from their property investment after selling their property. 

Related: The Impact of An Epidemic On Singapore's Property Market

Based on caveats released by the URA, there were 10,386 private residential transactions that year. This means that despite SARS, the buying and selling of properties still went on.

"Of that 10,386 transactions, 2,658 units were later resold within a 5-year time frame. Of this 2,658 units, 2,284 units were sold at a profit. Profitable transactions were x6 more as compared to non-profitable transactions. Owners made a profit of an average of about $331,000."

Source: Singapore Business Review

Moreover, buyers now have the advantage of a low interest rate environment to fund their property purchase. Some have even saved up to $1500 on interest per month by refinancing their loan.

In conclusion, though the property market is uncertain now there are opportunities available. At a time like now, it is important to do your research and calculations to ensure that all figures make sense before you make a move. Be educated and empowered with all figures and comparison to make a better informed decision.

#weeproperty #singapore #covid19 #realestate #propertyinvestment

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All efforts have been taken in ensuring the accuracy of all data and information presented here. We shall not be liable or held responsible whatsoever for any loss or inconvenience caused relating to decisions and actions made by the audience. This article is not intended to give investment advice or recommendations.