Singapore Property market may have brighter prospects in 2021

SINGAPORE’S ECONOMY was seriously affected in 2020, when Covid-19 paralyzed the globe and lowered Singapore’s GDP by 5.8%, a post-independence low.

Despite the fact that Singapore’s property sector sagged as a consequence of the stress, the impact was largely less than expected and a fraction of what was witnessed during the Global Financial Crisis (GFC) in 2008/9. This represents Singapore’s current strong property market fundamentals, as well as the government’s Covid-19 solution packages’ efficacy in holding many companies solvent and sustaining occupier demand for real estate space.

Warehouse demand has more than increased, although office rentals have dropped less than anticipated.

Warehouses became the standout star, with demand surging due to stockpiling requirements and the e-commerce boom. In 2020, total absorption of warehouse space was two-and-a-half times what it was in 2019. As a consequence, the vacancy rate for industrial room fell from 12.0% at the end of 2019 to 10.4% at the end of 2020, holding rents steady.

The average vacancy rate for Grade A CBD offices increased 2.7 percentage points in 2020, placing downward pressure on rentals. From S$10.81 per sq ft, per month in Q419 to S$9.81 per sq ft, per month in Q420, the average monthly gross effective rentals of Grade A CBD office property dropped 9.3% in 2020. Nonetheless, this is a drop in the bucket relative to the 49.1% drop in rentals during the GFC’s first four quarters of correction. It’s even higher than the 12% decline we expected when the Covid-19 epidemic began in April 2020.

Because of border closures and safe-distancing steps, the supermarket industry suffered the brunt of the pandemic. Because of the reduced need for retail space, average monthly gross effective rents for prime retail space dropped 9% to 16% in 2020, with the Suburban sub-market faring better than their Prime and Secondary sub-market peers.

Strong demand for property restart Collective Sales demand

Owing to a shortage of substantial trading reserves, global instability, and a decreased realistic capacity to conduct transactions as a consequence of the pandemic, investment revenues dropped 46% from S$32.1 billion in 2019 to S$17.3 billion in 2020. Nonetheless, this is nearly double the paltry S$9.2 billion reported during the GFC in 2009, illustrating consumer trust in Singapore’s property sector today versus a decade ago. A healthy interest in Singapore’s real estate kept asset prices relatively steady in 2020, with the exception of a minor fall in retail space capital values.

Private residential home prices, in particular, resisted recessionary strain in 2020, increasing 2.2%. Developers sold 9,982 new houses in 2020, which was close to the 9,912 units they moved in 2019. This is reducing unsold inventory and reviving the residential joint land sales market, which is projected to pick up speed in 2021.