Construction delays, low interest rates, and the WFH boom. Thanks to the pandemic, the Singapore property market is booming right now.
The Singapore property market is sizzling hot in 2021.
Thanks to the combination of the pandemic, construction delays, low interest rates and the Work From Home (WFH) trend – the Singapore property market right now is booming. This property situation is not unique to Singapore – a lot of countries around the world are also facing the issue of skyrocketing property prices.
“A home buyer, who wanted to be known only as Ms Tan, said she had been looking forward to moving into her new BTO flat in Punggol later this year, after living with her in-laws for the past five years. But her hopes were dashed when she was informed of a nine-month delay to her five-room flat in a project called Northshore Cove, and she is worried that it may be further delayed. She said living with her in-laws is mentally taxing as she frequently clashes with her mother-in-law on how to raise her five-year-old daughter. “My husband and I hesitate to rent a place and move out because we have already tolerated this living arrangement for five years, (so) what is one more year?” said 26-year-old Ms Tan, who works in the finance industry.
The Straits Times, 10 May 2021
For some who are able to tolerate the delays, they will continue to wait. But there is a substantial group of buyers who are not willing to wait and are keen to purchase a home from the resale market.
This behaviour of buyers willing to pay increasing Cash-Over-Valuations comes from the situation of increased demand and limited supply.
Here I share 3 stories to show how hot the Singapore property market is. The intensity of the demand is quite serious and had led to many unexpected behaviour that is rarely seen in my years in the property industry.
Story #1: Bidding war over a 30-year old HDB flat
I’ve been in the property industry long enough to see old HDB flats being unwanted and always being low-balled by potential buyers. Such older HDB flats are often ignored as buyers preferred to go after newly-MOP 5-year old HDB flats for its longer lease.
Hence to observe a bidding war for an old 30-year old HDB flat was very surprising even for me.
My sellers had received an offer in January 2021 but due to personal reasons had to hold back the sale. When I remarketed it again in March 2021, I had a packed 1 day of viewings of which we received 2 competing offers.
The newest offer was actually $8k more than the previous offer in January 2021.
Overall, it resulted in a $40K in COV for an old HDB flat with a balance lease of less than 70 years.
The intensity of the current market is most obvious in the HDB segment.
In most of cases that I have handled, buyers have been willing to pay Cash Over Valuation.
The main reason being the buyers include not just those who have sold their flats but are looking for replacements but also new buyers who would prefer the resale route over the BTO route as its impacted by the construction.
Story #2: HDB resale buyers with agents have an advantage
You might think this is a ploy by me to try to get you to engage me as your agent.
But this is the truth. You try to imagine the situation of property agents who represent sellers in a red-hot property market.
Seller agents have no lack of suitors and would like to get the best deal possible in as a reasonable time frame as possible.
It will then be very logical for these seller agents with HDB listings to may prefer dealing with buyers represented by agents.
Why? This is because buyer agents would have done the pre-qualifications for their buyers and will guide them through the process.
Before you can buy a HDB flat in the resale market – buyers would have to submit various forms like Intent to Buy and obtain the HLE letter. HDB processes are long and will require detailed planning and overwatch to follow through. If these processes are not done properly, it would be very easy for any deal to fall through.
So it is natural for seller agents to want to deal directly with buyer agents than dealing with direct buyers themselves. It provides reassurance that the transaction are very likely to proceed smoothly with no hiccups.
In a HDB transaction, buyers will have to pay a 1% commission to their buyer agent to act on their behalf. For a transaction that most people only undergo perhaps less than 5 times in their life and likely to be a very important one in their entire life – this 1% might be worth it to pay.
In today’s market especially – where you might fall into the danger of overpaying for that home – you would want to pay someone to keep a lookout for your best interests and make sure you are protected at every step in this journey.
To get the attention of HDB seller agents especially in this phase of COVID-19 restrictions, get the services of a buyer agent to help you.
Story #3: Sellers withdrawing their listings to try to catch a higher price
This is another common situation. I have dealt with sellers who make a decision to withdraw their listings altogether in an effort to try to catch a higher price. They read the headlines of rising property prices and believe they could fetch a higher price.
But this is very tough to predict as the buying momentum can just easily disappear. Why?
The news reports from data. And data takes time to be collated, analyzed and before finally being reported.
The news could simply be reporting an earlier wave and in reality, the press is too slow to really capture the actual ground sentiment and what is going on.
No one can really say when it is the top of the market.
But a smarter way could be to put the property into the market and seek a higher asking price and the market offers and interest will indicate if the property is truly at that price level or needs more time to market to hit that price.
Either way it is better to stay marketing earlier rather than later.
If a seller is selling to replace, it is also important to note that if you were to sell and buy in the latter part of the cycle, although you may achieve a higher price (assuming), it also means you have less choices in the market should the same number of potential sellers market in this cycle. So do take note.
Other owners may also delay their listings as the current situation will create more heightened alerts towards viewings and in this regard, there may be a short term lack of options to choose from in the market.
With that said, I believe its better for listings to hit the market early – with prudent measures in place to keep owners, tenants and viewers safe.
Conclusion
My stories above are just to provide some context on the actual reality of what is happening in the 2021 property market. Might it be differ from agent to agent? Yes.
But overall, any agent worth their salt would say 2021 presents an unprecedented opportunity to finally exit from a property investment at a peak. It is also a chance to recoup potential losses due to exuberant and urgent buyers who are looking for a place to stay. In the recent past 5 years, HDB resale prices have been sliding downwards.
2021 marks a strong and robust reversal as seen in my own experience of selling a 30-year old HDB flat.
However, if you are selling and then planning to buy afterwards – do be prepared to pay higher as well for your next home. Selling your home is a big step and I urge caution.
There is no point selling your current home at a record price but becoming homeless next because you are not able to secure your next home due to improper planning and poor advice.
Looking for advice or have questions? Feel free to contact me with your questions via whatsapp or the contact form.
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