Property market resilient despite economic uncertainty

Bong Xin Ying


The crowd at the EdgeProp 360 talk on July 10 (Credit: Albert Chua/ The Edge Singapore)


While investors typically retreat to the sidelines in the face of macroeconomic uncertainty, property buyers in Hong Kong and Singapore have bucked this trend. During the weekend of June 22 and 23, while thousands of protesters besieged Hong Kong’s legislative building, units on sale were swooped up by eager property buyers. According to South China Morning Post, Sun Hung Kai Properties sold 116 of the 130 flats offered in the second sales phase of the Mount Regency complex in Tuen Mun; while in Yuen Long, out of the 128 flats on offer at New World Development’s Atrium House, 111 units were sold.

In Singapore, the same weekend saw the launch of Sustained Land’s freehold Sky Everton with nearly 40% or 102 units sold. To date, URA data shows that 134 out of a total of 262 units have been sold.

“So it tells you something: it’s very hard to bring down this residential animal. It is going up, and it wants to go up,” says Alan Cheong, executive director, research & consultancy, of Savills Singapore. Cheong was speaking at the EdgeProp 360 event, titled “Separating fact from fiction: The search for the best yield”, held at Capital Tower on July 10. His view is that while property resale prices will be “flattish” this year, prices of new sales are on an uptick.

According to Savills Research and historical data from URA, of the 26 interventions implemented by the Singapore government since 1981, only seven have been pro-market. However, the price index for all private residential property (including EC) has been on an uptrend, despite the many cooling measures over the years.


Cheong: It’s very hard to bring down this residential animal (Credit: Albert Chua/ The Edge Singapore)


Cheong notes that because of rising household savings, property prices today are more affordable than they were even in 2013. A year since the last round of cooling measures, the market is “really healthy, neutral, [and] not in the bubbly territory”, he says. Even in the luxury market, the prices in 2Q2019 were “higher than even before the cooling measures”. Bearing in mind that many of the buyers are foreigners who pay a higher buyer’s stamp duty, the ultra-high, net-worth market is still going strong, says Cheong.

On the perception that transactions by foreigners have been propping up the Singapore property market, Christine Li, head of research, Singapore and Southeast Asia, of Cushman & Wakefield (C&W), asserts that the number of foreign buyers is exaggerated. Also speaking at the EdgeProp event, she said: “I just checked the data today [July 10]. The foreigners’ share of property actually dropped by 30% post-cooling measures.”

Li notes that the example of Hong Kong “speaks volumes” about how Hongkongers are “still very confident” about their market. Also, the mainland Chinese are still more confident about the Hong Kong market than about the Singapore market. Regardless, there is “always this 5% of foreigners who like Singapore, no matter how bad our economy is, [or] how bad the prospect for residential property is”, Li observes.


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Property supply

Previously, the Government Land Sales (GLS) programme accounted for about 70% to 80% of supply of private homes, says Savills’ Cheong. In 2015, only 4% of the supply was from collective sales. Then came the collective sales fever from 2016 to 2018. “In 2017, 17% of the supply was from the collective sales market,” says Cheong. “This year, we will see the full flood of the supply from the collective sales market.”

As for the Singapore office market, there is a slight under-supply, according to C&W Research. Based on long-term average, demand outstrips supply, with absorption rate estimated at 1.4 million sq ft (msf) while supply is at 1.2 msf. This is despite new projects in the pipeline such as Guoco Tower.

In addition, the supply of commercial space in the CBD is shrinking. This is evident from the supply of commercial sites from the government’s Reserve List. The Marina View white site at Shenton Way, for instance, was designated to be a commercial site, and was allocated about 1.09 msf in 2011. In 2018, the same site had only 21,528 sq ft of commercial space for use, while the remaining space can be developed into a 540-key hotel and yield 905 residential units.

C&W’s Li says: “This is pretty much in-line with the 2019 Draft Master Plan, to make the place more vibrant.” She adds that the government’s long-term intention is to keep supply in the CBD low to encourage its decentralisation initiatives. “From what we have gathered, the CBD supply [will] only increase by 14%. If going by the supply pace as of now, in the suburban or the city fringe [area], the non-CBD supply is going to shoot up 178%,” says Li.

Away from the CBD, the decentralisation initiatives have spread across the island, namely to the Woodlands Regional Centre, Tampines Regional Centre, Paya Lebar Central, Labrador, Jurong Regional Centre, and Punggol Digital District.


Investment opportunities

Given these factors, C&W’s Li believes there are pockets of investment opportunities in the commercial market. “Since the residential en bloc is not happening … if you have the cash, you can consider commercial en bloc,” she says. Apart from the above-mentioned areas, she describes the Greater Southern Waterfront as a “very interesting growth area”, as it is three times the size of Marina Bay. The Greater Southern Waterfront can be “a city on its own”, Li asserts. “I won’t be surprised if there were to be a third integrated resort (IR) in this area,” she adds.



Meanwhile, Savills’ Cheong is undeterred by macroeconomic uncertainty and the possibility of rising interest rates. “It’s not that you should not hedge against interest rates. [The key is not to be] led astray by well-sounding arguments and opinionated pieces,” he advises.

Cheong adds: “If you can afford it, if you think that you have faith in residential property prices or the private residential property sector, just buy. I am really confident [about] the market.”


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