Updated: Nov 15, 2020
Thinking to upgrade your house or invest in a property? We analyse past trends to give you some advice.
With a pandemic gripping the world and causing industries and businesses to come to a standstill, the buying and selling of property is among the many that are not business-as-usual.
It’s apparent that there will be an economic recession as a result of the COVID-19 outbreak. Based on advance estimates reported by the Ministry of Trade and Industry, Singapore’s GDP contracted by 2.2% in the first quarter of 2020 - the worst contraction since the 2008 Global Financial Crisis.
Sales of new private homes have, understandably, fallen since March this year. For those who want to upgrade to new private homes or invest in property, we get that you might be apprehensive about spending and committing during this uncertain period.
Here’s what we think about investing in a property amidst the COVID-19 outbreak and Singapore’s Circuit Breaker period.
Do pandemics affect property prices?
Short answer: Yes.
Long answer? Property price fluctuation happens not only during pandemics but also global crises.
We dug deeper and found a trend. Previous crises such as 9/11, SARS, the Global Financial Crisis, and H1N1 led to a negative GDP growth, which simultaneously impacted prices of private residential property.
Past trends indicated that prices decline for a while during a crisis. Going back to the basics of economics, the supply and demand theory could be a reason for the decline in prices during global crises and currently, COVID-19.
Many investors like yourself are waiting for the economy to plunge even further and bring property prices down with it, hence not everyone’s interested in buying yet.
Property prices will fall for a short period of time so this window of opportunity won’t be open for long. Other buyers might think the same way, which is why volume of sales is likely to rebound even before COVID-19 ends.
Good things don’t last forever!
The window of opportunity for snagging private properties at lower prices is small, usually within the first quarter of a crisis (three months in). There are still buyers and investors out there who probably had the same thought and wanted to take advantage of the fall in prices.
Research has also shown that people will start buying properties again even before GDP recovers, and volume of sales may drastically increase within merely half a year.
So contrary to popular belief, there are people who believe in the property market and eventually signed above the dotted line. They took a risk and it paid off.
Strike while the iron is hot
Based on past trends and data that we’ve analysed, now you know that the optimal period to invest in a private residential property is usually the first few months into a crisis.
People who bought properties during past crises made higher average gross profits. Alexis @ Alexandra, Caspian, and 8@Woodleigh are examples of new condos that were snapped up during the Global Financial Crisis and achieved the highest profits.
Let’s talk about COVID-19 in 2020.
While showflats for new condos are closed during Circuit Breaker (viewings can be conducted virtually), there are still investors entering the market.
There were more than 70 new units sold since the beginning of April alone, which is promising for the property market - and it means virtual tours are doing wonders!
If you start planning or preparing now, you can have your cake and eat it too.
We understand that investing in a property during COVID-19 is a risk in itself. There were buyers who made a loss on properties purchased during the financial crisis.
However, the number of units that made losses was almost eight times higher during the years after the crisis, when home prices were at their peak.
Here’s one last piece of information that may help with your decision-making: Nine in 10 properties in the Outside Central Region (also known as mass market private properties; more affordable than luxury private homes) that were bought in 2007-08 were profitable. Let that sink in!
Of course, you have to do your due diligence and assess your financial capabilities before committing to a huge investment.
For those who see the opportunity in this once in a decade event, it’s time to start planning. We hope you get to be a beneficiary of this golden era!
Need better clarity on what to do next? Here’s how we can help!
WhatsApp us for a one-time, free 30-min Property Wealth Planning consultation via online video call.
A PWP consultation includes:
An in-depth financial affordability assessment
Highly relevant investment insights
A customised and systematic investment road map to strategize your real estate investment journey ahead