Home prices may further drop in Q2

More sellers are likely to move their asking prices down as the circuit breaker extended.

Home prices’ downward movement seen in Q1 is projected to spill over into Q2 on the back of subdued market confidence and lowered GDP forecasts, according to PropertyGuru’s Property Market Index Q2 2020.

PropertyGuru’s Singapore Property Price Index (SPPI) fell 1.1% QoQ in Q1. Similarly, the Urban Redevelopment Authority also posted a 1% dip in prices of non-landed homes, excluding executive condos, which is attributed to lower consumer confidence. 

“[T]his quarter signals higher downside price pressure and is likely to continue for another quarter, as Q2 2020 bears the brunt of at least two months of circuit breakers,” the report stated.

As a result, more sellers are expected to be forced to ease their asking prices. PropertyGuru said that developers are generally holding firm on asking prices as of now, as they are still well-capitalised and have sufficient runway to observe the market situation before their five-year time frame to sell off all inventory is up.

“At this stage, the broader market has also not felt the brunt of the economic impact as government stimulus packages help stem the bleeding at all levels of society. However, despite the stimulus, money velocity remains low. It is likely that we will witness sharper corrections in Q2 as certain gaps in the market place cannot be filled by rescue packages,” the report added.

Some districts were noted to have performed well despite the pandemic. The Core Central Region (CCR) is currently leading the correction in prices, a trend that was observed in past crises, whilst districts in the Outside Central Region (OCR) have either remained mostly resilient or bucked the trend. This could be attributed to the sound fundamentals and quiet confidence across the general population in how the Singapore government is managing the COVID-19 situation, the report said.

“Although sentiments point to an overall correction in the property market, PropertyGuru believes that the correction will not be excessive given the robustness of Singaporean households’ and developers’ balance sheets, and the systemic safeguards that have been put in place via prudent Total Debt Servicing Ratio (TDSR) and Loan-to-Value (LTV) measures over the years,” it added.

The online property portal cited SingStat’s Yearbook of Statistics 2019, where the growth in liquid assets amongst Singaporean and PR households has outpaced the growth in liabilities. This is said to indicate greater financial resilience of the masses to withstand any short term shocks to the property market.

Further, business owners and investors will likely be forced to liquidate their portfolios amidst the pandemic, as a means to stay afloat.

“Agents whom PropertyGuru’s Research Team spoke to, indicate that many have received interest from their existing clients to scout for ‘good deals’ as the situation unfolds. Many are willing to enter the market if they were offered a deal with good risk premiums, and hold through the recovery, as they have seen how property prices have rebounded back consistently in the past,” PropertyGuru stated.

Ready buyers are said to be in search of three- and four-bedroom apartments, penthouses and landed properties.

In addition, projects that are completed or nearing Temporary Occupation Permit (TOP) are also expected to be of interest to buyers, as developers with nearer Additional Buyer’s Stamp Duty (ABSD) and Qualifying Certificate (QC) deadlines may resort to discounts to lower risks to their balance sheets.