2020 Is A Confusing Year
2020 is a confusing year for a lot of people. Due to the pandemic, governments were forced to implement measures that had severe financial repercussions for certain industries. As a result, some companies cannot survive, job losses mount, and there is a ripple effect to this consequence. So, the question is this. Why is Singapore’s housing market so resilient? Prices seem to defy gravity despite this economic fallout. Is this all an illusion and fake news because developers were reissuing options to prop up the numbers? Well, it all boils down to basic economics, and there is a perfectly reasonable explanation behind this.
Headlines Like These On Bloomberg Only Serves To Add To The Confusion
A Health Crisis Does Not Mean Economic Hardship For Everyone
Firstly, you must understand that we are facing a health crisis and not an economic one. A lot of people get confused between these two. While some industries like oil and gas, retail, tourism, airlines get severally battered by lockdowns and quarantine, there is another group of businesses that did incredibly well. These sectors include e-commerce, software, staples, healthcare, and anything related to activities that involve staying at home. As a result of the shift in business activities, some people prosper and become multi-millionaires. Yes, there is an economic fallout for some but others, it is a pay-dirt day.
2020 Is An Incredibly Good Year For Some. Photo by Geronimo Giqueaux on Unsplash
Inelasticity Of Demand Accounts For Why Certain Developments Do Well
Secondly, the types of products sold during this time are mostly those that have inelastic demand. Or those with elastic demand at marked down prices. Unless you understand the real estate market well enough, the average consumer may not understand this fact. To make things worse, we have conspiracy theorists or misleading headlines in the press that will tell you that reissuing options is the main cause of healthy sales. There is this impression that everything is held together by a house of cards and ready to topple anytime soon! In fact, one even wrote that buyers of these properties are gamblers just a couple of months ago!
Well, my objective is always to help you as a consumer to see things in a clearer perspective. And only by purely looking at the data would you be able to piece together a sensible picture and use this information to make better decisions. Unfortunately, from what I see so far, the journalists who write articles on real estate does not seem to be doing this at all.
Consumption Of Condos Over The Past 10 Years
One of these data I will be showing you is the consumption pattern of condos over the past 10 years; this data is taken from one of my favourite websites at www.squarefoot.com.sg. What I did was to compile all the numbers for new launches and resale over the past 10 years. Besides, I have also added in a comparison ratio between the number of new launches sold versus the resale in the market.
Consumption Of Condos From November 2010 To November 2020
| Year | New Launches | Resale | Sub Sale | Grand Total | New Launch Versus Resale/Subsale Ratio |
|---|---|---|---|---|---|
| Nov 2010 to Oct 2011 | 17925 | 13350 | 2719 | 33994 | 1.11 |
| Nov 2011 to Oct 2012 | 22978 | 11353 | 2454 | 36785 | 1.66 |
| Nov 2012 to Oct 2013 | 18794 | 7055 | 1358 | 27207 | 2.23 |
| Nov 2013 to Oct 2014 | 9501 | 4308 | 623 | 14432 | 1.92 |
| Nov 2014 to Oct 2015 | 9995 | 5298 | 452 | 15745 | 1.73 |
| Nov 2015 to Oct 2016 | 11207 | 6769 | 473 | 18449 | 1,54 |
| Nov 2016 to Oct 2017 | 13607 | 10860 | 383 | 24850 | 1.21 |
| Nov 2017 to Oct 2018 | 9150 | 12930 | 355 | 22435 | 0.69 |
| Nov 2018 to Oct 2019 | 10304 | 8831 | 275 | 19410 | 1.131 |
| Nov 2019 to Oct 2020 | 10020 | 8401 | 151 | 18572 | 1.17 |
As you can see for yourself, we are somewhat ranging in the 1:1.1 ratio of new homes sold versus those in the resale market these couple of years. The ratio is far lower than we had from 2011 to 2015. The only exception was the year 2017. If you do recall, that was the year where we had the enbloc fever where developers were going on a buying spree to increase their land bank. This low ratio also clearly tells us that the data reflected is a fair gauge of market consumption. Not something that is overly inflated.
Why Did Sales of October 2020 Fall Then?
Then what about the fall in sales in October? Isn’t this attributed to the curb of re-issuance of options? Well, I implore you to look at the projects launched versus the take up to arrive with your own conclusion. To make things easier for you, I have compiled this data for your reference.
Consumption Of Condos From June 2020 to October 2020
| Month | New Launch | Resale | Subsale | Grand Total | Projects Launched That Month |
|---|---|---|---|---|---|
| June 2020 | 974 | 337 | 3 | 1317 | Nil |
| July 2020 | 1052 | 951 | 11 | 2014 | Cairnhill 16 (Total Supply: 39/Sold: 0) |
| August 2020 | 1209 | 1153 | 21 | 2383 | Forett @ Bukit Timah (Total Supply: 633/Sold: 213) Noma (Total Supply: 50/Sold: 34) |
| September 2020 | 1326 | 1084 | 7 | 2417 | Verdale (Total Supply: 258/Sold: 44) Penrose (Total Supply: 566/Sold: 389) Myra (Total Supply: 85/Sold: 17) |
| October 2020 | 669 | 1137 | 5 | 1811 | Hyll On Holland (Total Supply: 319/Sold: 4) |
As you can see, the main reason why sales have been particularly exceptional in August and September is simply that there are more units launched for sale. The drop in October is not because sales were weakening! Rather, it is due to the higher consumption of units in September because there were more units to choose from!
Why Penrose, The Linq @ Beauty World And The Landmark Sell Well
From the comparison table, you would also understand that some developments do exceptionally well compared with others. Why? These developments offer units that have demand that is more inelastic in nature and usually of a lower quantum. Once they appear in the market, they are almost always snapped up. The characteristics of these condos are something like that of BTOs. If you need to understand the characteristics of these demand like these, you can refer to my article on “Can the Oversupply of Upcoming Condos Cause Prices to Collapse? Part 2 of 3.” Penrose, The Linq @ Beauty World as well The Landmark are projects with units that belong to this category.
The Linq @ Beauty World Sales Data. Do Note That The Sales of The Linq @ Beauty World Are After The Rules To “Curb Market Distortion”
It Is Dangerous To Look At Only Data From One Month To Arrive At A Conclusion
Navigating the real estate market in Singapore is not as simple as before. News articles without proper research can give consumers the wrong bias, and you may end up making the wrong decision. In fact, if you were to look at the numbers closely, you will notice that the supply of new homes is getting a deficit with demand outstripping current supply. The total consumption works out to be 5230 for these few months while the new supply only comes up to 1980. So, if you are looking for a new home, your choices are, in fact, reducing every month. To make better decisions on real estate, why not speak with us today? Meanwhile, stay safe, do your research, and always look at the numbers!
Article contributed by Jerry Wong.
Jerry Wong is a realtor with Propnex Realty. He loves coffee, cookies and condos and has been in real estate for ten years. Most importantly, he loves connecting people to properties and gets enormous satisfaction when they acquire their dream home. Or making well-informed decisions that see their assets grow. Book a video call appointment and Jerry will share with you the following.
- How certain factors affect real estate prices. Why some condos can make a million dollars while others can lose that same million.
- Why timing is not the most important thing. Because some people can buy the same condo at the same time, but one end up making $100k to $200k while the other suffers losses of the same amount!
- Understanding your requirements and craft a solution for your real estate needs. Be it in the form of asset progression, tax planning, financial calculations, rentals, sales, etc.
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