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As we return to normalcy in our lives with Phase 2 (19 June 2020) albeit having to wear masks, simple moments like eating our food at our favourite hawker place that was taken for granted can resume once again.
This news has bought much relief to participants of the real estate market as well. Buyers and sellers can resume show-flat and home viewing.
As we are heading towards economic uncertainty echoed by many leaders of state worldwide, many of my clients have expressed mixed emotions on the fallout of COVID-19.
If I were to describe the sentiment of buyers in today’s market with one word, I think the word “apprehensive” is the most appropriate.
Why is this so? This is because many still believe Singapore’s private residential market will remain attractive in the long run but are wary about the risk of default and the timing of their entry.
We can divide buyers into 2 categories based on their sentiment on the real estate market.
So who is right? Let’s see these those claims supporting the respective views.
Many realtors alike have been using the past financial crisis and pandemic to justify why they think now is an excellent time for entering the real estate market. Looking at Singapore’s strong fiscal and monetary policy and hands-on approach towards real estate management, it is no surprise why many investors still invest properties here to hedge against volatility and inflation.
I am sure you have seen many realtors sharing the sales figures amidst post-COVID-19 pandemic for the M condo and Luxus Hills. The 70% sales achieved for The M condo over the first weekend of launch and the 64% first-week sale numbers for Luxus Hill surprised many outsiders of the residential property industry.
Examining the latest sales result of May 2020, developers in Singapore sold 484 new private homes in May, going by sale caveats. This is 74.7% more than the 277 new private homes they sold in April.
The impressive sales figures before and after circuit breaker measures just goes to show the resiliency of the Singapore real estate market. As long as the price is right combined with the right financial planning, buyers will still on the lookout for value buys.
For buyers holding a more conservative view, is comparing the past crisis a good way to estimate the fallout of this COVID-19? Many economists and realtors often draw inferences from historical data to predict the impact on the real estate market. They are not wrong.
Past trends tend to repeat itself, but for conservative buyers, they tend to be mindful that each crisis has ever changing variables.
For example, the rapid spread of COVID-19 is one that is unprecedented. Even though COVID-19 fatality rate is lower than that of SARS, the ability to spread quickly makes this a much deadlier disease than SARS. This explains the extent of Singapore’s lockdown unlike what we ever experienced. Thus, the impact on the economy is much more unpredictable.
With so many news outlets and websites on various social media platforms competing for your attention, it’s hard to know where to turn. Mix market signals make it challenging for investors to commit to a decision when it comes to investing in real estate properties today.
It has become increasingly difficult for buyers to sieve out the right information and decide on which property to buy at the right time.
This explains the purpose of my post. I will share with you an alternate indicator that investors can use to time their entry.
One good way to anticipate real estate recovery is to track mobility trends, this is especially so for the retail sector. COVID-19 has accelerated some consumer trends such as the demand for online shopping. Plans in the pipeline to decentralise existing CBD areas are likely to be accelerated when the COVID-19 situation improves.
The mobility trend report charts movement trends over time by various countries. It highlights change in visits to places like supermarkets and parks within a geographic area.
The supply chain and logistic sectors are often regarded as pillars of economic growth on a global level. It has implications not just on a manpower dependent economy like Singapore but it also describes the movement of essential goods, such as medical supplies, foodstuffs and agricultural products.
Mobility trends are directly co-related with logistic activities. It supports the movement of economic transactions. Virtually, all delivery of goods and services cannot do without logistics facilitating the sale.
To simplify, if goods do not arrive, customers cannot complete the transaction, hence no sale is conducted. Therefore, it is safe to assume that all forms of economic activity will require some levels of logistics support to meet consumption demands.
A decline in such mobility trends may suggest the following:
This information on mobility trends can complement other leading indicators to provide a more comprehensive recovery narrative.
Let’s examine these 2 articles describing the post COVID-19 situation in China (swipe to see more)
On one article, it shows a promising sales figure following post-COVID lockdown. Buyers of real estates are confident of the resiliency of the real estate market. The other article seems to suggest sluggish economic activity even after the lockdown has ended.
These 2 articles seem to suggest a deviation of fundamentals against real estate activity. There may be other factors affecting real estate price sales volume and prices. Even though sales figures are critical in providing recovery insights, they are often subjected to a short-term knee-jerk reaction from changing government policies and aggressive promotional pricing by developers.
This is why I strongly believe mobility trends can provide a much more comprehensive recovery story than just sales figures alone.
The month following COVID-19 circuit breaker period, one obvious trend we witnessed was a significant deviation from the baseline for the 3 categories of mobility options. Transit and walking options have shown the largest deviation from the baseline. This is to be expected as many are transitioning towards a work from home arrangement. The population which needed transit services during the circuit breaker are essential workers.
This downward mobility trend corresponds with what is happening on the ground during the circuit breaker measures. As a result, a decline in both retail and commercial spending has been reported. This has caused multiple small businesses to adopt many drastic cost-cutting measures which includes retrenchment.
To put things into perspective, let’s examine the mobility trends in Taiwan.
Taiwan has been lauded as one of the few countries that have escaped COVID-19 largely unscathed due to their prompt and decisive virus response measures.
Looking at their mobility trends, there is largely not much of a variation from the baseline following the post virus outbreak.
The resumption of economic activity is aligned with the mobility trends reported in Taiwan.
As a result, Taiwan virus response efforts combined with the recovery of public mobility trend has renewed investors’ confidence in the region. To date, a total of US$114.3 million worth of investments in the hotel and retail sector has been recorded so far this year.
This sum is more than a fifth of the US$536.3 million in the investments they recorded in the first half of 2019.
Mobility trends are not without their shortcomings too. Readers of this post should be mindful that mobility trends only seek to complement any existing reports to get better insights for buyers to plan their entry or exit of their real estate investments.
Some points to keep in mind for users of the mobility trends report are:
Is investing in Singapore’s real estate safe?
The answer is YES. Prudent financial planning combined with careful interpretation of market indicators can protect and safeguard your real estate investments.
Singapore will continue to remain a country that prides itself as a stable and open market. It is this stability and openness that lends itself much credibility in the world stage. This will give investors the confidence to participate in Singapore’s growth story and continue to improve Singapore’s image as a safe asset haven.
In my years in the real estate industry, I realised that there are always 2 sides of the same coin, especially in real estate transactions. There will always be pros and cons regardless of selling or upgrading in a time of crisis.
However, with the right preparation and knowledge, I seek to value-add to all real estate participants with the right property portfolio enhancement journey.
If you are facing challenges about whether to sell or hold your existing HDB or private property. I invite you to contact me for a free assessment!
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Tan Hong Jie, Huttons Asia Pte Ltd
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