How Covid-19 pushed the property market to adapt

Things are looking up, with virtual viewings, digitalisation of the industry set to continue

Leong Boon Hoe

For The Straits Times

SINGAPORE - During the worst phase of the pandemic, many people wondered if the property market would come to a screeching halt and result in the greatest fall in prices since the turn of the millennium.

However, the market proved to be quite resilient. And this did not come by sheer luck.

First, government intervention through stimulus packages and jobs protection aid insulated Singaporeans from the full brunt of the economic slowdown and minimised the number of people affected by retrenchments or business closures.

It was reported that around 150,000 jobs will be saved over these two years, with more than half of them by the Jobs Support Scheme.

Second, the loan repayment moratorium helped to cushion the shock of job losses and these measures collectively helped prevent the widespread distress sale of homes.

Statistics have shown that residential properties make up a large chunk of the Singaporean household balance sheet, with the other components being investments in financial products, insurance and savings.

That developers received an extension to project completion times alleviated some of their stress. As a result, the market did not experience mass reduction of prices just to move units.

Another factor that helped was the low interest rate environment.

An interesting trend has emerged over the past few crises - Singaporeans tend to plough more into their residential properties. Perhaps this signals that such properties remain an asset class of choice in times of hardship.

ROLE OF TECHNOLOGY

The property market did take a pause at the start of the circuit breaker period in April, when transactions slowed. But once people got the hang of how to use the technologies available, activity restarted.

Just as people turned to Web tool Zoom for their videoconferencing needs, developers relied on digital solution providers such as Matterport to create virtual show-flats when physical viewings were disallowed during the circuit breaker period that lasted almost eight weeks.

Digitalisation became a top priority for the real estate industry.

Developers created online and digital marketing collaterals. Agents learnt how to engage prospects using virtual walk-throughs. Analysts gave their take on the market via webinars.

We witnessed the first virtual or remote balloting and unit selection process, which allowed for sales to happen without having the need for buyers to be physically present at the show-flats.

The digitisation of sales documentation also allowed for remote and efficient paperwork processing.

While most people welcome the opening of show-flats after the circuit breaker ended, social distancing guidelines ensured a maximum number of visitors at any one time.

There is no doubt that virtual viewings will remain a useful tool for agents and the digitalisation of the real estate industry will continue, and rightly so.

SPIKE IN DEMAND

Past transaction patterns in Singapore showed that the annual underlying or core demand in both the new and resale market is about 9,500 and 9,000 units respectively.

The spike in demand witnessed after the circuit breaker ended should be considered more of "recovery buying" than "revenge buying".

While the numbers showed a strong rebound, it is a climb up from a low base due to the paused market situation in April and May.

While the global economy is definitely not out of the woods yet, the new year presents a much more optimistic economic outlook and Singapore is likely to come out of the recession with a strong showing.

The low interest rate environment is also likely to persist for a while more.

All factors are pointing to sustainable home sales volumes and pricing levels next year.

Developers have worked up an appetite for sites as their land bank depletes.

Some of the sites on the confirmed and reserve lists of the Government Land Sales programme could satisfy their hunger. These plum sites are expected to encourage active bidding and some confident pricing levels could be achieved.

Foreign buyers are also likely to return to our shores next year. With a vaccine in sight, borders are likely to reopen soon, albeit slowly and safely.

Singapore's ability to keep the Covid-19 situation under control and the Government's efforts in competing for and attracting foreign direct investments and foreign talent make this an attractive destination for foreign individuals and businesses to invest in real estate.

It looks like Singapore could end the year with about 9,500 to 10,000 new home sales and 10,000 to 10,500 resales.

This indicates that the market is fulfilling the core demand levels and not anything speculative. Of course, low interest rates and developers dangling incentives to encourage sales helped.

It took a pandemic to make people re-evaluate their priorities in their lives and in what they look for when buying a home.

Suddenly, a humble balcony with some plants has become a place of respite, and a quiet space to conduct that Zoom call has become a luxury, especially if that part of the room has an impressive background.

These changes are more likely permanent than transient. It will be interesting to see how developers take interior design of living spaces to a new level.

To those who say "never waste a good crisis", it is good to remember that there is always another one coming.

• The writer is the founder and chief executive of Arcadia Consulting, a real estate advisory and brokerage firm in Singapore.