The surprising turnaround in the private property market comes in a year where the local economy contracted by 5.8 per cent, based on the government's advance estimates.
According to the Urban Redevelopment Authority's (URA) flash estimate on Monday, prices of private homes in Singapore rose 2.1 per cent quarter-on-quarter in Q4 2020 in the highest quarterly increase since the 3.4 per cent notched in Q2 2018 before the last round of cooling measures kicked in. This comes on the heels of a 0.8 per cent increase in Q3 2020.
Kiwi Lim from Huttons Asia explained that billions worth of hot money from overseas provided ample liquidity in Singapore's financial market, a very low attractive interest rate environment as well as improving buyer sentiment give plenty of room for private home prices to head upwards in 2021 and the return of foreign buyers to Singapore with the eventual easing of border control measures.
"This recession has been very uneven, it's hit the lower-wage sectors a lot more," he went on to say, adding that there are still certain sectors in the economy that continue to expand. "At the same time, one of the peculiarities about this recession is the surge in the personal savings rate, (with) the higher income segment not being able to spend on a lot of services, including travel. Some chose to plough it back into property."
By region, prices of non-landed homes in the CCR, or prime areas, rose 3.3 per cent in Q4, reversing from a 3.8 per cent decrease in Q3. Noting that CCR had underperformed with its index shedding 3.4 per cent in the first three quarters of 2020, JLL's senior director (research & consultancy) Ong Teck Hui, said: "The lower prices could have attracted buyers and contributed to the price increase in Q420. The rise in the CCR index was accompanied by an increase in the proportion of high value transactions of S$2,700 per square foot (psf) and above during the quarter."
In the city fringe or RCR, prices increased 4.8 per cent quarter-on-quarter in Q4 2020, compared to 2.5 per cent in the previous quarter. Meanwhile, in the suburbs or outside central region (OCR), prices were up 1.7 per cent in Q4 2020, similar to the 1.7 per cent increase seen in Q3.
Private home prices in Singapore could climb again this year as a recovering economy lifts sentiment after the private residential property index shrugged off the impact of a global pandemic. 2020's upcoming project launches in the pipeline are mainly in the luxury and city fringe areas therefore will help push the private property index in 2021 higher.
"Demand for resale homes is expected to pick up further this year, while resale prices may increase around one to 4 per cent for the full year", Head of research & consultancy at OrangeTee & Tie, Christine Sun.
Knight Frank estimates that overall private residential prices could go up by around 5 per cent this year, while PropNex forecasts home prices could climb a further 2 to 3 per cent, owing to a better market outlook and a decreasing supply of unsold units.
Huttons Asia's director of research Lee Sze Teck expects private home prices to rise by up to 3 per cent in 2021, with up to 20 new projects to launch in H121. He said: "Selling prices are expected to edge up because of recent firm land tender prices and higher construction costs because of Covid-19 safety management measures."