Is private residential investment still an opportunity?

Colliers REview Singapore blog - CM is private residential property investment still an opportunity

Coupled with attractive property prices and a weak economic outlook, investors and buyers are presented with an opportunistic year to acquire properties at a discount.


[This article has been updated as of 18 May 2020]

The current coronavirus (COVID-19) pandemic has caused many uncertainties and turbulence in the market -- from stock price fluctuations, to panic buying. In such a challenging environment, many investors and buyers have been conservative with their investment decisions while monitoring the market very closely.

A common question now is: Is private residential investment still an opportunity in current times? 

I thought I would give everyone my fresh perspective on the situation: This crisis can also be viewed as an opportunity for investors and buyers -- not to be missed.

Prices are softening

In these uncertain times, we have noticed that -- unsurprisingly -- sellers’ price expectations are softening.

Based on the recent flash estimates from the Urban Redevelopment Authority of Singapore (URA) on 11 April 2020, private residential property prices have fallen by 1.2% quarter-on-quarter (QoQ) in Q1 2020, after rising for three straight quarters. Colliers Research also projected 2020 to be the first year of decline since 2016

We expect a lagged effect on property prices as the effects of COVID-19 reverberate through the economy and hurt market sentiments. However, property prices are expected to remain resilient and are unlikely to fall as much as the 25% drop during the Global Financial Crisis (GFC). This could be due to better credit management and our government's efforts in dedicating about 11% of its GDP to support businesses, workers and families.

Property: A more resilient and less volatile investment

Compared to the stock market, the property market may be a better bet as property prices are generally more resilient and less volatile.

The Straits Times Index (STI) has fallen significantly ever since the COVID-19 was declared as a pandemic - and is projected to fall even further.

"Many investors and buyers tend to wait for prices to drop even further - but this could be a strategic mistake. If you wait for the prices to drop even further, the property will most likely not be ready and operational in time for when the pandemic is over."

 

Investing in real estate remains a great way to hedge against inflation. Coupled with attractive property prices and a weak economic outlook brought about by the COVID-19 situation, investors and buyers are offered with an opportunistic year to acquire properties at a discount.

Timing is of the essence

Many investors and buyers tend to wait for the prices to drop even further before purchasing a property -- but this could be a strategic mistake.

The real estate market is typically one of the first to recover, and tends to bounce back quickly from every major crisis, including the GFC in 2008, the Europe Debt Crisis in 2012 and the China Stock Market Crash in 2015. Sales completion would also generally take about three months or more, taking into consideration any renovation or Addition and Alteration (A&A) works.

If you wait for the prices to drop even further, the property will most likely not be ready and operational in time for when this pandemic is over.

Although it is difficult to predict when the market is likely to hit rock bottom and when it will pick up again, now is a great time for opportunistic buyers to consider properties as an investment.

Still considering if you should invest in that residential property you've been eyeing? Reach out to our Colliers' experts to find out which opportunities work best for you.

 

You may also like: Singapore property: Is it time to buy? [Podcast with Head of Research Tricia Song on Money FM 89.3]

 

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Steven Tan

Senior Director

Singapore

Steven has over 25 years in the real estate business and progressed through various roles in this industry from property management to valuation and auction then into investment sales to leading the  non-institutional capital markets – added to his original role as head of the auction team in Colliers Singapore.

Steven is known to preserve a close relationship with his clientele who are High Net-worth individuals - known in the local as Tow Kay (big boss in local dialect), investors from all walks of life and business partners big and small, making him the leading choice to head the non-institutional capital markets.

Steven was lauded for brokering the first freehold industrial sale in the year 2020 for 190 Macpherson Road at $88m. His other notable and worth-mentioning deals include the collective sale of 2-24 Phoenix Road at $42.6M which was sold above its reserved price and another industrial building (food factory) at 200 Pandan Loop at $56.8M.

Steven also qualified as a licensed appraiser with the Inland Revenue Authority of Singapore, a member of Singapore Institute of Surveyors and Valuers (MSISV) and member of Royal Institute of Chartered Surveyor (MRICS).

 

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