Singapore real estate market to witness growth in 2021

Prime non-landed residential segment registered $919.5m in H2 2020.

Amidst the expected decline in transaction volume and prices of prime non-landed residences due to the recessionary environment brought about by the COVID-19, the Singapore real estate market is expected to record growth in 2021.

According to property consultant Knight Frank, prime non-landed residential segment registered sales amounting to $919.5m in H2 2020, signifying a 34.2% half-yearly increase from $685.1m in H1 2020.

A total of 143 units were sold in the second half of the same period, an improvement from the 87 units sold in the first half. The average unit price of prime non-landed residential units in H2 2020 stood at $1,916 per square foot, posting a 21% decline from H1 2020.

However, travel measures restricting the inflow of visitors prevented potential foreign investors from physically viewing units, resulting in a 20.4% YoY overall decline in sales of luxury homes.

Moreover, Knight Frank noted that in the second half of the year alone, 253 landed homes exchanged hands, compared to 108 units in H1 2020. The landed residential market segment registered $2.5b sales in H2 2020, with the property consultant suggesting that the gap between buyers’ and sellers’ expectations had narrowed.

“One of the key demand drivers for landed homes was the rising trend of working from home, as prospective buyers considered larger floor areas and close proximity to amenities such as parks,” Knight Frank stated in the report.

As such, Knight Frank has projected that the demand for luxury homes in the city-state will grow in 2021 as investible properties have moderated to comparatively more affordable price points. This is driven by the stable political environment, as well as the extensive measures implemented to mitigate any recurrences of infections in the country.

This outlook is expected to strengthen foreign buyers’ confidence in the market, which could translate into greater sales of prime non-landed residential units once the COVID-19 vaccine distribution proves to be successful and travel restrictions ease.

Similarly, commercial real estate services and investment firm CBRE’s outlook report opines that the Singapore real estate market will see a recovery in 2021, albeit uneven across sectors, as the city emerges from pandemic-induced disruptions.

“Brighter prospects are expected for the local economy towards the latter half of 2021, led by the service and construction sectors. Nonetheless, as the global COVID-19 situation remains volatile, recovery is likely to be bumpy and uneven,” CBRE head of research for Southeast Asia Desmond Sim said.

Sim added that the Monetary Authority of Singapore is likely to retain its accommodative policy stance in 2021, keeping interest rates low, to facilitate the country’s economic recovery.

“The extended low interest rate environment will increase the attractiveness of commercial real estate in Singapore, especially those that can provide stable returns. What’s more, as Singapore continues to establish itself as an aviation and distribution hub, logistics demand is expected to remain healthy,” he said.

CBRE projects that whilst the first half of 2021 is expected to still be under pressure, the latter half is likely to witness some improvement. Office leasing demand is expected to be led by the technology, finance, and professional services sectors as there is a high demand for their services.

“Remote working is expected to affect office demand but the physical office still remains relevant for firms to curate a social identity. De-densifying of office space based on current safe distancing may cushion the impact,” CBRE said.

Barring any unforeseen circumstances, the firm also forecasts that investment sales volume in 2021 is likely to rebound by 30% from the nearly $11.30b recorded in 2020.

Moreover, average prime retail rents are expected to stabilize over the course of 2021 after falling by 8.6% YoY in 2020. CBRE suggests that rather than focusing purely on rents, landlords and tenants should establish better synergies in the aspect of flexibility in lease negotiations and terms.