CB is ending but the rich are still buying Singapore Property. Why?

Updated: May 20, 2020

Good news! The government has announced that the circuit breaker will ends on 1 June 2020 and business operation will resume in phases.

The latest, as of today (19th), there are 451 new cases of new Covid-19 in Singapore, with a total of 28,794 diagnosed cases!

The figures seems huge. However, the situation in Singapore is improving.

The Ministry of Health stated in latest report that most of the newly diagnosed cases were work permit holders residing in the dormitories. In addition, one case is a Singaporean or permanent resident. The infection rate of Singapore citizens, permanent residents and community cases is less than 1% of the total.

Stricter Safe Distancing Measures

In the early stage of the outbreak, the health status of this group of foreign workers was not given due attention until the outbreak. The rapid development of Singapore over the years cannot be separated from the sweat of these foreign workers.

When the pandemic came, they were the worst hit.

The Singapore government is aware of this serious problem. The living conditions of 300,000 foreign workers have been improved immediately, and infected people have also been effectively isolated and treated.

Under the pandemic, Singapore property market "unmoved"

Why ?

So recently, what has been happening in Singapore property market??

Let's find out.

New trends in the property market

1. Alibaba spent 1.68 billion Acquired 50% equity of AXA Building in Singapore

It's not surprising that Jack Ma's family is in Singapore. Almost all of the world's top 500 companies have business in Singapore, radiating the world with one city. Coupled with the Singapore government's consistent support for high-tech enterprises.

But why is Alibaba buying now?

Don't they worry that Singapore will collapse, is the Singapore dollar worthless? Don't they worry about sea level rise, is Singapore submerged? Don't they worry that the flight will be grounded forever, will Singapore become an island with difficult transportation?

It seems that Alibaba is not worried about these, the answer is simple-because it is cheap. If it were not for now, there would be no such price.

Modern society has experienced countless troughs and ups and downs. Let us recall that when we were in the trough at that time, which one of us did not feel dark and hopeless? However, is there any time when human society has not overcome difficulties and moved to another peak? I have written in my previous blog, "After COVID-19, what will happen to property prices?" We should believe that this time is no exception.

2. Trends in Singapore's private housing market

According to URA Realis data, a number of luxury projects continued to move units after the circuit breaker measures were implemented, including Boulevard 88, Midtown Bay, Van Holland, Kopar at Newton and Neu at Novena. Two super-luxury condominiums at Boulevard 88 were sold for more than S$10 million each. Both were 7th-floor units (257 and 258 sqm) transacted on 14 April 2020 for S$10.3 million each at S$3,711 and S$3,714 psf. Two other luxury homes at Van Holland were sold for $3.2 million and $5.1 million. A total of 293 units were sold by the developers in the month of April.

OCR is a mass market that is dominated by ordinary apartments, and the CCR is a luxury market for high-end apartments. Why is there a higher volume of transaction in CCR than OCR? This is determined by the investment habits of different people.

This applies to any investment product, whether it is stocks, real estate, oil or gold. Risk avoidance is human nature. Most people wants stability in the market and they always end up entering at Stage D or E. (Shown below Figure: Typical Consumer Mindset). If you can enter during Stage A to C, then you are truly a real investment master.

The question is "Do you dare to take the risks in timing the market??

Successful billionaire investor, Warren Buffett already says, "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

If you are not risk-takers, it is important to learn to how to buy the condo itself for a better return. You can catch my video here: https://www.youtube.com/watch?v=b7aVLG3p71U

Figure: Typical Consumer Mindset

Back to the moment we just saw the huge difference between the ordinary private residential and high-end private residential markets. In this setting, many buyers of ordinary private homes are the first time to buy an apartment, and they are extra cautious. Under this kind of mentality, the possibility of buying during the downturn is very small.

In the high-end market, Jack Ma and Vicki Zhao (China actress and billionaire businesswoman) must be pioneers, but they are by no means alone. Vicki Zhao's husband buys $28 million penthouse near Orchard Road in the midst of circuit breaker.

Despite the pandemic, most of the buyers of high-end private homes have certain investment experience, have a strong ability to withstand risks, and dare to take action when opportunities come. They continue to view Singapore as an attractive investment destination and a safe haven to park their funds.

Do you know Singapore Local actor, Romeo Tan recently bought his apartment in Marina One Residences too?

3. Singapore's "Protective" market environment

Singapore's real estate market is in a very "protective" environment due to loan curbs such as tighter Loan-to-Value (LTV) ratios and Total Debt Servicing Ratio (TDSR). Very few home owners in Singapore are desperate, and they can afford to go a long time without dropping their price. They have these tricks up their sleeves. (Read blog: 7 Strategies to bridge over crisis)

Plus, the government has stepped in with extra protection in this circuit breaker period. First, unlike China Wuhan, the Singapore government bears 75% of the labor costs of private companies during the circuit breaker operation, grants all commercial properties exemption from property taxes and give commercial rental rebates minimising social unrest and unemployment. Second, as the Fed’s interest rate fell to zero, Singapore’s real estate interest rate also fell sharply, reaching a minimum of 1.2%.

In order to combat the pandemic, since February this year, the printing presses of central banks around the world have been operating at full capacity. Through quantitative easing policies, the world has “created” US $ 3.9 trillion of wealth, accounting for 6.6% of global GDP. Some partners are unfamiliar with what is quantitative easing. Simply put, the government is sending money to spread coins to encourage consumption. After some complicated circulation and operation, it will eventually circulate into two big pots, one is the stock market and the other is the housing market.

Hence every countries are finding ways to channel this global money into their economy.

The Singapore government is considerate despite the fact that the interest on the mortgage has reached 1.2%. They are still worried that someone cannot repay the mortgage loan because of the circuit breaker. By applying with the bank, you won't have to pay a penny for the mortgage for the past six months.

Third, the support to the extra 6 months extension to Singaporean married couples upon the date of purchase (Exercise date) of their 2nd matrimonial home (Completed property. Bought under two names) to sell off their 1st matrimonial home. For uncompleted properties, the 6 months countdown start from the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) date, whichever comes first.

By doing so, buyers qualify for the ABSD refund which they had paid upfront when purchasing the 2nd property. E.g. ABSD for Singaporeans buying their 2nd property is 12% or $120,000 for a $1 million dollar property.

Fourth, the extension of sale timelines for property developers with qualifying residential, commercial and industrial property developments. This automatic extension of sale period will allow market conditions to stabilise, hopefully recover, and deter unnecessary panic selling by developers which would have a cascading effect on the rest of the market.

An important joint statement to highlight by the Ministry of National Development, Ministry of Finance, Ministry of Law and Ministry of Trade and Industry stated that:

"The Government will continue to ensure that prices for private residential properties remain broadly consistent with economic fundamentals."

Fifth, enhancements were made to the Temporary Relief Measures for the Property Market on the 13th of May 2020. Detailed FAQ can be found here covering 2 contracts used in the purchase of new projects sales and HDB sales.

Simply to say, it is to help buyers who are unable to exercise their options and buyers who are unable to make payments on schedule.

4. Developers Action to take

Developers are big players with deep pocket money. With the strong holding power compared to individual homeowners, there is no doubt for the companies to overcome the circuit breaker period and close the showflat for months.

However in 16 May 2020, Government published there will be steps to curb coronavirus transmission and that will raise construction costs.

Here comes the question: Who will pay for the extra cost ?

Developer has been bidding for the rising cost of government land and keeping a slim margin of profit. Inflation surely takes place so do the rising prices of the construction raw material. With this additional cost of curbing coronavirus transmission, they have to pass the costs to somebody such as increasing their selling prices.

What can you do as a buyer or seller?

If you’re looking for a new home, take advantage of the slowdown – the inactivity of others gives you an edge. You’re more likely to get the unit and facing you want; and for resale units, you have fewer buyers competing with you right now.

For sellers, now is a good time to engage an outgoing and active property agent. It’s a good idea to engage an exclusive agent as well, to ensure your property doesn’t go on the back-burner – it’s during this slow period that you most need an agent to prioritise your sale. (If you’re upgrading from an HDB to a condo, for instance, you only have six months to sell your flat after buying your condo).

Contact me for help, if you find your viewings and prospective buyers seem to be decreasing.


Read my blog about property investment insight: https://www.jacksontan.net/blog

Watch some light-hearted property advice video: https://www.youtube.com/channel/UC-X0sV0SffDIfXUSFI0R0sg

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