The impact of the coronavirus pandemic has rippled across the globe and disrupted most forms of business activity. Quarantines and movement restrictions imposed in many countries have halted trade, tourism and retail.
Real Estate hasn’t been spared either. Singapore’s implementation of circuit breaker measures in April has impacted the private residential property market, as show flats shuttered and house viewings were discontinued.
Strict safe distancing measures have also disrupted the home purchase process for potential buyers, who have to rely on virtual house tours to assess properties. According to data from the Urban Redevelopment Authority (URA) the overall price index of private homes slipped 1% quarter on quarter in the first quarter of 2020, after rising for three consecutive quarters.
But this decline is not as severe compared to initial price falls observed in the price crises.
A first quarterly price decline of 1.9 per cent was recorded in 1996 at the start of the Asian Financial Crisis, while the global financial crisis saw an initial drop of 2.4 per cent in the third quarter of 2008.
How much will decline further will depend on the duration of the pandemic. Other factors include the unemployment rate and financial health of homeowners.
As of now, we have not seen significant numbers of homeowners defaulting on mortgages, likely because of several past cooling measures such as the Total Debt Servicing Ratio and Mortgage Servicing Ratio. These instil financial prudence in buyers by capping a borrower’s gross monthly income used to service their housing loans.
These limits will also not apply to the principal and interest for deferred payments on mortgages, as part of the Singapore Government’s package to aid homeowners during this challenging period.
Investors should take a long-term view in any property investment. Singapore will continue to be a top investment destination and a safe haven for investors. Despite the current economic slowdown, fundamentals that have attracted foreign investors all these years such as the ease of doing business, transparency, safety and political stability – will likely remain unchanged. Investors should take a long-term view in any property investment. Singapore will continue to be a top investment destination and a safe haven for investors. Despite the current economic slowdown, basic fundamentals that have attracted foreign investors all these years – such as the ease of doing business, transparency, safety and political stability – will likely remain unchanged.
A silver lining in the COVID-19 cloud lies in Singapore’s track record, where the private property market regularly recovers after every economic crisis. Private properties have generally yielded positive capital appreciation over the past 30 years.
Based on URA’s price index, prices of properties have risen across all market segments and weathered through some of the toughest crises including SARS, the Asian financial crisis and the global financial crisis.
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