Singapore Residental Property Market Outlook 2021

Updated: Jan 15

Hi folks, I'm finally back from my writing hiatus and I’m excited to share what I had been up to during these disappearing months.

Even since Phase 2 opened up I have been busy with viewings and consultations. In the last quarter of 2020, I saw prices in both the resale and new launch market going up. As an agent, it should be good news right?

Well, while it’s nice to see the real estate market picking up, a part of me was having a hard time digesting this rise. I share with some of my close friends that I cannot understand the rise in prices and I would correct myself, I understand why the prices will rise, I think I just cannot accept it.

As I felt we are still in the midst of a pandemic, the global economy is still suffering, there is constantly bad news surrounding us. However, the stats and trends have proven to be quite contrary to my feelings.

As I cast my doomsday feelings aside and study the figures and trends to address my cognitive dissonance I begin to make sense of the happenings, which became this post and hope it will be of value to you.

In an earlier post, I wrote about how Singapore Real Estate will remain resilient despite the storms, and I am quite glad that indeed the market remains stable despite a volatile economy.

If you are looking to enter the market or restructure your existing portfolio in 2021, I hope the following insights will help you to cut through the noise and navigate your purchase and selling in a steady manner.

In this post, I will cover the following

- What is the residential property market outlook for 2021?

- Who should enter the real estate market?

- Final thoughts

What is the Market Outlook for 2021

To look into 2021, we need to understand how historically, global events affected Singapore's real estate market and next make sense of what has happened in 2020 to understand what will likely unfold in 2021.

Quantitative Easing (QE) was first introduced in 2008 Global Financial Crisis as a stimulus for the economy. As part of the measures to support the economy in the midst of the Covid 19 pandemic many countries introduced various stimulus to the economy and for the United States, they once again deployed the QE to inject more money into the economy.

The graph below shows the relationship between the QE and the S&P500 (stock market index for top 500 companies in United States)


When there is an increase in money release into the market, there will be gains in the market. The QE has been used as a tool to stimulate markets.

What has this got to do with Singapore Property?

Singapore Property Price Index vs S&P 500

This graph shows an interesting relationship between the Singapore Property Index (SPI) and the S&P 500.

In Q42002, there was a gradual rally in the S&P500 and resulted in a bull run in the Singapore property market 7 quarters later in Q32004.

In Q42008, there was another bull run in the S&P500 and similarly, our SPI recovered in Q23009 about 2 quarters later.

Thereafter there seems to be some divergence in this relationship between 2013 to 2017, this is due to the Singapore government introducing several rounds of cooling measures to taper the fast growth in property prices.

Despite this, it’s still important to note how the S&P500 has an impact on the Singapore property market. The closing gap between these 2 trends at the current juncture is a good indicator of what is going to happen next in the Singapore Property Index.

Next, let’s look at how the QE affects property prices in Singapore.

Singapore Property prices Vs Money Supply

Global Financial Crisis Timeline

Flow of Funds

During the Global Financial Crisis, the Fed Reserve starting releasing money in the market which result in gains in the US stock Market is Q12009. Thereafter there is also a rebound in the Singapore stock market in Q12009. Which later led to a rebound in the Singapore real estate market.

After more money is released into the market in 2008, you can observe the rise in the Property Price index. Now let’s look at the money flow during the Covid-19 pandemic.

Increased Money Supply Injected into the Market

In just 6 months, more than 3 trillion dollars and counting have been printed in the US alone compared to $1 trillion over 30 months following the Global Financial Crisis.

This unprecedented injection of stimulus has created a large amount of cash to flow from the government to the market which has caused a rally in the S&P 500.

Money Supply flow during Covid 19

This time around, while it’s unlikely to see the same steep bull run that happened after the global financial crisis, due to the more complex nature of the impact caused by COVID 19 ( border restrictions, the resurgence of the outbreak, and localized lock downs still happening in different places) the gains from the stock market due to the increase in money supply will still find it’s way to go into safe-haven assets like real estate.

Hence a real estate rebound will likely take place from investors who reap gains in the markets and are looking to put their funds in real estate.

Early Signs from Latest Data

Price Growth in both Private Residential and HDB

A delayed effect from the increased housing grants can be observed in the last Quarter of 2020 where there is an acceleration in price growth in HDB prices. At the same time private property prices also climbed slightly.