Thinking of buying a property during this Covid-19 crisis? This may be helpful.
These are uncertain times. With the world reeling from the raging pandemic and the global economy expected to take a massive hit from the crisis, the natural instinct would be to hold back on any major investments until the fog has cleared. This has proven to be largely true with only 293 units sold in April 2020, which is a 67.6 per cent drop from March. These are the lowest monthly sales since December 2014. On a year-on-year basis, developers’ sales declined 62.4 per cent.
However, the April new sales figure is still commendable in spite of the the circuit breaker restrictions that started on the 7th of April. Despite the bleak outlook and uncertainty, why are there still those that are acting with certainty when it comes to property investments? Is there something that these buyers know about that other investors do not? Why are they not waiting for prices to come down before committing to a purchase?
These are valid questions and if you look deeper into the data and the attributes of the projects that have garnered the most interest, you will start to understand why.
The chart on the left shows the top selling new launch projects during the Circuit Breaker (CB) period up to the 3rd of May 2020. As expected, the first week of the CB shows a drastic drop in buying activity and this is understandable given the closures of showflats and the restrictions on agent-client meetings. However, what is interesting is that as the month progressed, there is a pickup in buying activities in all three regions.
Leading the way would be projects in the OCR areas namely the Treasure at Tampines, The Florence Residences and The Tapestry. Even before the CB, these projects have been selling well given their mass-market appeal, competitive pricing and functional layouts. The Tapestry has the added advantage of achieving their TOP within the next few months which would naturally attract those that want to move into new homes quickly. Given the strong sell-through rate for these projects, and strong developer balance sheets, prices have remain firm with little sign of discounted pricing any time soon.
Another notable project that has caught everyone’s attention is the Kopar at Newton. On the first day of launch on the 4th of April, a total of 77 units out of 378 units were sold. This was just before the start of the CB period on the 7th of April. The developer Chip End Seng, aware of the uncertain sentiment in the market, priced the project accordingly and this has resulted in a strong take-up rate which has continued till date. This has also been helped by its central location within walking distance to the Newton MRT, good unit mix and premium finishing.
According to caveats, other luxury developments continued to sell units during the month of April as well. They include Boulevard 88, Midtown Bay and Van Holland. For example, two units at Boulevard 88 fetched $10.3 million each and a unit at Van Holland was sold for $5.1 million. This may indicate that despite the pandemic, many wealthy and ultra-rich continue to view Singapore as an attractive investment destination and a safe haven to park their funds.
If historical information is any gauge, property prices and transactions tend to rebound very quickly and the correction, if any, tend to last for an average of 3 quarters only. There are also some in the market expecting a Post-Covid-19 recovery be similar to the post-H1N1 rally which saw a big jump in terms of transactions volume within a short period.
What this would mean is that the window of opportunity to get into a good property at the right price is relatively short. This could also be the reason that a discerning group of buyers are acting as they are now, especially if they see a project that ticks all the right boxes like at The Kopar at Newton.
Perhaps Warren Buffet's famous quote of "Be fearful when others are greedy and be greedy when others are fearful" does ring true for some. As some would also say, "Never waste a crisis".
In uncertain times when we can act with certainty based on sound information, we can certainly reap the greatest reward.