Are you in a sell high buy high situation?
After a boom period in which properties across Singapore soared in value, 2022 presents a different environment for sellers and buyers – sell high buy high situation. The only consolation factor is 2022 is ending.
With news about the recession, high inflation, and rising interest rates, yet when we browse the internet for properties, the price asked by the sellers seems to be at an all-time high. There’s a lot to consider for anybody thinking about listing their home. Is it best to take advantage of the still-high prices before they decline further? Or is there value in waiting to see how the market holds up?
According to JLL, real estate investment volumes in the Asia Pacific could fall 5 – 10% in 2023. This would continue the moderation recorded in 2022, which is expected to record a full-year decline of 25% year on year, the consultancy says. “Optimism driven by the idea of the pandemic coming to an end has slowly given way to caution amid concerns about inflation, interest rates, and geopolitics. While the Asia Pacific region is likely to fare better due to more resilient domestic demand, it will not be left unscathed from the broader challenges,” says Roddy Allan, chief research officer of Asia Pacific, JLL.
So then, why are condo prices still surging?
4 supporting factors to describe
Higher costs and risks for developers
The still-recovering global supply chain unleashed inflationary pressures on all industries. Pandemic-induced labor, material shortages, and logistics gridlocks added to delays and cost hikes. Construction was no exception, with costs spiking 20 – 30 percent. Yet, with a persistent demand-supply gap, the government sprung new property cooling measures on the private property market, raising further costs and risks for developers. To hedge against this margin squeeze and risks, developers raised prices.
Supply squeeze
The stock of unsold units in Singapore has been shrinking. December 2021’s cooling measures raised uncertainty for developers, leading to a pullback in land banking. The government has also cut the combined supply of land parcels for private housing by 5 percent for the first half of 2022.
Demand drive
Local support from En-bloc sellers, downgraders, and parents with the latest “Parent Assist Program (PAP)” buying for their children in anticipation of even higher prices. Investors shifting funds out of volatile equities hurt by surging interest rates – to potential capital gains and rental income from the property. Rising mortgage rates have not deterred many, as buyers may be able to cover such increases amid a healthy job market and salary increments.
Foreign buyers
Many regional buyers are “impervious to rate hikes”. Their holding power helps to sustain prices, especially since a good number buy Singapore property, not for a quick flip but also to preserve wealth.
Prices are unlikely to pull back, but analysts and consultants expect the pace of increase to ease as some prospective buyers get priced out by loan restrictions. Upgraders see lower profits from the HDB resale market after the recent cooling measures, and new home launches have dwindled.
Stay with us as we provide more updates on property news.