2021 XMAS Special: WHAT IS NEXT FOR THE SG PROPERTY MARKET? 2022 PRICES GOING DOWN?
If you have been following Aaron and his insights, this article and video is one not to be missed. This Xmas special is a lengthy one that breaks down what happened in 2021, what's brewing and perhaps shed some light on the possibilities that await us in 2022.
Editor's Note: This video is prepared 1 week prior to cooling measures being announced.
There are always going to be many different perspectives on how one interprets the property market and the ways of the industry. What we are sharing here is Aaron's interpretation and honest views based on his experiences over more than a decade of work as a real estate agent and consultant.
There will be a variety of interconnected topics touched on, so let's get right into it!
The main intent of us sharing these views is to bring a certain knowledge & experience backed perspective into looking at the Singapore property market, and possibly offering answers for questions related to prices, trends and what to look out for.
We will look at what has happened in early 2021, what seems to be happening this December, and then will might and likely will happen for 2022.
What has happened?
Covid-19 started back in 2019 and we have since lived through many stages and so called phases of managing the pandemic. For the property market, the most significant effect has been that property prices went on a upwards trend, with records prices being reported every couple of months. Especially for the resale market, we saw the record for highest price transacted broken every couple of months.
The reasons seem to lie squarely with the fact that Covid has decreased leisure spending on big-ticket items like overseas travel, emphasised the importance of a living space that is also conducive to remote working or WFH arrangements, and also got people thinking more about investments with the uncertainty coupled with spare cash on their hands.
Thus, the implication is that prices have kept on creeping up, leading to an expectation by sellers that they will continue to see higher prices
Current signs and symptoms
As the year 2021 comes to a close, some threshold seems to have been met in the recent months. We have seen that property takes longer to be sold in end 2021, especially when compared to end 2020. Units are no longer sold within a week, the whole process takes longer and there are less enquiries compared to before. This is especially in the private market, with less offers forthcoming.
HDB units still get a relatively high enquiry and response rate for listings. However, it does seem that the properties in the market have met this threshold, a ceiling of sorts for the prices and transactions. The prices seem to have gone up in early 2021 but are they still as high in the last 3 months of the year?
If we look at the transacted prices of units in 2021, the 'record-breaking' transactions are from the earlier part of the year in the first half. Seems like there are less people buying as we approach 2022, in a direct contrast to 2020 December.
One strategy we have seen by experienced buyers in the private market is that they sell at current prices and downgrade to a HDB, some in preparation to retire. These people are trying to get out of the private market and perhaps are even willing to take a 20-40k loss in the long term on their HDB purchase.
This strategy is relatively clever, as it takes advantage of the high prices in the private market right now. There is a risk of losing more in the private market compared to a HDB unit due to the higher quantum involved, and thus we see these experienced buyers willing to pay a COV and paying the full amount.
Waves in the market
The market is showing signs that units are getting higher to sell. Coupled with signs that the US stock market appears to be tanking, amid talk of interest rates going up. This are telling signs of what might happen to prices in the property market too.
At the same time, there are some voices which hint at a fear of missing out (FOMO). Advertisement slogans shout about how remaining units are the 'last few' units buyers can buy and that there are no more opportunities. For that, Aaron has some choice words, and hopes to remind buyers to consider why these units are still around and are not already bought.
It's expected that high prices bring about fear in people, especially for those who have a need to buy and own a property. For these people, a property purchase is more a need than a want and even so, they question if the current period is the best to make their purchase. There is a sentiment that prices are very high and so people do not want to pay these same high prices.
What 2022 will be about?
There are always up and downs, and nothing goes up forever. Thus, there is a need to consider the possibilities and buy cleverly.
En bloc tenders have also been affected by the price movements of 2021. There are a few projects that have happened recently or are going through in January 2022, but there has not been a large amount of success, with some projects not getting the 80% required. The failing en blocs are directly linked to the fact that resale prices are at an all time high.
There is an optimism that property prices can go higher in the en bloc market, but if prices have reached a tipping point, where en blocs are no longer feasible, then we have to question that optimism. This is actually just due to the prices in the resale market.
For 2022 new launches, we are able to anticipate the prices at which they will be released simply by looking at the government land sales (GLS) prices. Are these prices going to be considered reasonable? We will have to wait to find out.
Developers have 5 years to sell these new launches which means a timeframe that goes up to 2026/2027 thereabouts. Looking back at previous new launches, they have most of their units sold within the timeframe.
The market is also rather transparent, in that good units get sold out quickly whilst those that are not great takes a longer time to sell. The launches of 2022 will determine the trends for the upcoming few years with their determined prices and whether they actually can sell at those prices.
Buyers are usually willing to pay more if they are looking for a place to stay in. On the other extreme, when people are looking to invest, price becomes a primary consideration. Deciding where to stay brings in an emotional consideration and thus a willingness to pay a premium. Most buyers lie somewhere in the middle where they are looking for a place to stay whilst hoping to profit from it as an investment. Thus, this makes the locations of new launches an important factor too.
Based on Aaron's evaluation, there will be minimally a sideways movement in terms of price trends, if not a downward one. This lies from a sentiment of over-valuation in the market. Thus, to really discover how prices will move, it's important to keep a close eye on en bloc deals and new launches. By the time news and media starts their reporting, the effect would have been felt and too late.
Effects of Covid
The effects of Covid has brought around different results and consequences to people of the world. Some do well, others don't. Singapore's management of the pandemic leaves us with more winners than losers, and because of that, we see people that are flush with cash. However, the effects of Covid will not be permanent. We are seeing that travel for leisure has started to reopen gradually whilst the effects of the Omicron variant are still unclear.
Do you think what happened during Covid will continue? If we consider Covid to be a significant reason for prices going up, with less spending on leisure travel and a focus on investing, will the effect continue?
Possible misconceptions of investing
With investments being brought to the forefront of people's minds, there appears to be an influx of interested investors getting into markets like the US stock market, Crypto and Property. Do you really know what you are getting into and investing in? If yes, that's great.
We just want to warn against blindly investing and following unchecked claims and beliefs.
For Aaron, he is mainly familiar with the property market and thus have seen through his interactions with people that they are misguided in some of their investing concepts. There are obvious mistakes in a lot of interpretations and beliefs about the property market. One case in point is the belief to 'buy the remaining units because there are no more opportunities to do so otherwise'.
Thus, it's important to be informed before making your investment decisions.
This is a round up of 2021 and our interpretation of recent events littered with opinions of what we foresee as likely for 2022. So, keep your eyes open and observe what is happening in the property market as well as checking out the latest updates we have on the ongoing market outlook!
Check out one of the longest video Aaron has made, as he shares his experiences and secrets on how to evaluate the property market in this XMAS special!