Earlier this year, we shared in various articles that the prices of properties around the world had been supercharged by the effects of COVID-19 and the trend was evident globally (see here, here and here). Many around the world believed that this trend would continue, especially with the end of the pandemic in sight. In Singapore, we saw the "Pasir Ris 8 Frenzy" on the weekend of 24 July; 85% of the units were sold during that weekend, with prices of some units increasing more than 30% within the same day. While property owners/developers would love to see this trend continue, can this strong demand maintain its momentum?
It was reported by Channel News Asia that Singapore’s new private home sales dip 2.6% in June but the article attribute this to the COVID-19 restrictions introduced during that period. Is it really true that this was caused by the COVID-19 restrictions? Before we shed some light to this, let us look at one of the latest report relating to COVID-19 introduced by Bloomberg - the Covid Resilience Ranking.
Quoting Bloomberg, "The Covid Resilience Ranking is a monthly snapshot of where the virus is being handled the most effectively with the least social and economic disruption". In June, it was reported that USA topped the chart for this ranking. If there is strong correlation between COVID-19 restrictions and property demand, we should expect the the demand of property to continue its upward trajectory; however, the opposite happened.
In an article by CNBC, it was shared that the pending home sales in the US dropped in June and this usually signals a housing turnaround. As pending sales are a forward-looking indicator of closed sales in one to two months, we would definitely expect the sales figures to drop in the next few months. It was mentioned that while there seems to be demand, people are putting their plans to purchase property on hold due to the steep property prices and the increasing mortgage rates.
Signs of an impending decline in property demand and prices are showing in the US. Similar signs were seen in Singapore as well. Though the US and Singapore are quite the opposite in terms of the land area and the Covid Resilience Ranking for Jun'21, they both experience the same decline in property demands. We at Clicks™ agree that an in depth study should be done to come to a proper conclusion but this would definitely make us ponder on the assumption that the upward trajectory of property demand/prices would continue in the coming months/years. We do not have a definite answer for you now but our gut feeling tells us that a decline is on its way. In fact, as early as April this year, this buying frenzy had caused the government of Singapore to publicly warn its people to exercise caution when making decisions to purchase properties due to the rising rates. We just hope that this is not another property bubble in the making.