Real Estate investment is really all about entering at the right price, and most importantly – exiting when the time is ripe. And now is one of the best time to sell your property. It’s truly a seller’s market.
Supply is low and buyers do not have much choices, especially if they are looking at a particular area or development.
Many wonder why resale of all types, HDB, private residential condominium and landed houses, are all seeing prices increase now as compared to 2018 – 2019 (pre-COVID).
Some reasons:
- Due to COVID, many overseas Singaoreans have returned home. And these Singaporeans will need to look for a place to stay.
Some choose to rent, and some prefer to buy. And this spurs a whole cycle – owners who have sold, would then in turn need to buy.
- Many believe that real estate/ property remains one of the best investment vehicles. Equality (stocks) may be more unstable as we see how prices plunge and rise.
The property markets in developed countries like Singapore, major Australian cities (think Melbourne, Sydney etc.) continue to see prices climb amid the pandemic.
We seen firsthand how the Singapore government’s management of the crisis ensured robust transactions and stable prices. This, I believe, renewed our confidence in the Singapore property market.
- We are, mostly, all trapped and unable to travel. Sadly, I believe this situation will persist for a long while with the COVID strain evolving. Travel bubbles are created but burst before any real travel can occur.
So your home/ house/ apartment takes on a new meaning. It will be where we spend most of our time – both at work and off work. We are therefore more willing to spend (what’s more from the money saved from not being able to travel) on our homes.
Most people also realise that they require more space at home with the constant video meetings.
- I know many buyers who prefer a HDB Built-to-order flat or a private new launch project. Think spanking brand new units, less need for elaborate renovation and better capital appreciation potential!
However, with most if not all constructions getting delayed, many buyers find it necessary to adjust their expectations. They either rent (boom time for landlords as well), or they will have to settle for a resale HDB flat or private condominium unit.
Will prices remain high?
Unlikely in my opinion – especially if you are the owner of an older HDB flat. We all know prices of most 99-year properties tend to depreciate after a certain time.
Currently demand is high due to BTO construction delays. At the same time, the WFH (work from home) trend is making people start yearning for a bigger space and that is why 5-room HDB flats, EA and EM are suddenly in demand.
Right now, thanks to this weird combination of factors from the pandemic – even older HDB flats have a good chance of selling for a good profit. When supply remains low, buyers who desperately need a place, have no choice but to pay a premium.
This is quite unprecendented as HDB resale prices have been sliding downwards for more than 5 years and 2021 is marking a reversal in trend.
Why do buyers still buy?
Mostly driven by need-based reasons – e.g. newly weds who would need a place of their own. Families returning from overseas, as mentioned earlier. PRs who are convinced they are ready to reside in Singapore for a long time.
Others are encouraged by the low interest rates – savvy investors who want to make their money work. Resale units often offer immediate rental returns as well. Like resale prices, this is also a landlord’s market, which works out well for investors.
How much longer will this last?
The Government has hinted at implementing cooling measures if prices continue to surge. So I’ve many clients who are making good use of this period, to sell their properties – especially investors with more than one property.
If you are an investor, I would say go for it! Some who found it impossible to sell without making a huge loss in the past, are re-visiting the prospect of selling again now.
However, like all things, selling high could come with a price – as many sellers also need to buy when they sell. Some of my clients have sold first, and will stay with family as they plan their next move.
Others opt to rent for a year or so. Many buyers lamented they could have committed earlier and probably nabbed a place at a lower price but now, they are priced out of their preferred project.
Examples:
428A Yishun Ave 11 (Built 2015) – we managed to get an offer of $470,000 for a 4-room flat (92sqm) on the 11th floor in April 2021. Not reflected yet as we have just gotten the option to purchase exercised. Extremely thrilled for my clients, and thankful that they held on for the right price.
Now, let’s look at prices from 2018!
12 April 2018: #12-XXX: $402k
1 April 2019: #03-XXX: $358k
1 April 2019: #13-XXX: $390k
1 June 2020: #05-XXX: $375k
1 Dec 2020: #12-XXX: $400k
1 Feb 2021: #07-XXX: $430k
1 March 2021: #05-XXX: $400k
1 April 2021: #06-XXX: $435k
We knew the market was in our favor. On our first viewing, we had 3 groups who came and 2 groups came back with offers, $420k and $440k. But we decided to wait for a better offer.
The same situation occurred for the subsequent 2 viewings. Then we had to stop as one of the owners was sick. And to play our part and be responsible, we only resumed viewings when she was well, and cleared the SWAB test.
Then, the offer came in at $460k, which in all honesty was a good price.
Our asking was $480K (on the high side, looking at recent transactions), and we took a gamble and countered at $470k, which thankfully was agreed upon!
As you can see, prices have risen pretty significantly from 2018.
$470k was a great price – $40k above valuation. And this is what some buyers are prepared to pay.
Definitely not all buyers, but sometimes you just need to wait for the right group to come along. We took 1 month to find this buyer, and I’m glad the seller was patient enough to not grab the first offer that came.
Getting priced out
I’ve a long-time client who has been renting a 2-bed unit in Seafront By Meyer since 2014. He likes the place so much that he intends to purchase a similar 2-bed unit once prices “correct” *(in his own words).
However, for some freehold developments, prices just keep increasing.
Let’s look at 2-bed prices (1065sqft) from 2015:
Sept 2015: #21-XX: $1.17m ($1606psf)
June 2016: #07-XX: $1.55m ($1455psf)
Nov 2018: #14-XX: $1.89m ($1775psf)
Aug 2019: #22-XX: $1.92m ($1803psf)
Sept 2020: #09-XX: $1.92m ($1803psf)
Jan 2021: #13-XX: $1.97m ($1850psf)
He was so sure that COVID was his best opportunity to snag a bargain. But the opportunity I would say is more for the sellers to reap a profit.
Older developments
After Lawrence Wong announced in 2017 that the value of HDB flat would amount to nothing at the end of its 99 year lease, many started to shun older HDB flats.
Gone were the days of sky high cash over valuation, since many Singaporeans see their home (property) as one of their greatest assets and biggest investment. So owners of older developments are having a harder time to sell.
In late 2020, I was approached to market an older 5-room HDB flat (123sqm, completed 1977) at 22 Eunos Crescent.
It was a 4th floor unit and facing the expressway. Quite a challenge, especially when the owners were looking at a $70k-$90k above indicative valuation from past transactions.
A 15th floor unit was sold the year before for $440k. We were marketing our flat at $500k.
Truth be told, I didn’t have much confidence to fetch the price that the owner had wanted.
But I ploughed on anyway, and did my best to market and facilitate viewings. Most of the buyers were discouraged by the high asking price.
But after more than 3 months of marketing, we finally secured a buyer who had just sold her landed house and could purchase without taking any loan.
So the valuation didn’t matter. So I do consider myself very lucky to have brokered this deal.
Conclusion
I am not sure how long this trend will last. Right now, construction delays are fueling demand for ready-to-move-in homes. Demand is higher than supply currently.
But with vaccinations are being rolled out and the pace of construction starts to pick up, it is a matter of time before supply starts to stabilize.
And then cooler heads and prices will start to prevail.
If you’re selling your home, you will need to plan your next move carefully.
As selling high most often always means you will also be buying your next home at a high price as well.
Selling your home is a big step to take.
It is important to sit down and weigh the pros and cons properly.
Still unsure? Feel free to contact me for a non-obligatory consultation.
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