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  • Writer's pictureTT Lum

Why the Property Market is Still Doing Well During Covid-19 Crisis?

When we hear the word “Crisis” that is brought upon by the Covid-19 pandemic, the first thing that most of us monitoring the real estate market would think of is…

“It’s finally time for me to snap up some extreme good deals when the market dives badly!”

“Wait for prices to drop further!”

While this is the typical buy-low-sell-high strategy by savvy investors, if you have been following the market recently, you would have realised that this seemingly-sound strategy seems not exactly applicable in today’s market.

As a result of this market exuberance, the overall Property Price Index (which tracks the private residential market) was reflected as such:

Why is the property market climbing despite quite possibly the worst economic recession that Singapore has ever seen?

How is this even possible?

While we do acknowledge that such a trend is indeed surprising to witness for such a major economic crisis, after analyzing several possible factors, it does seem that our Singapore Government had a very significant role to play to enable the stability of today’s real estate market.

Factor #1: Cooling Measures – TDSR/LTV/ABSD/SSD

Over the past 10 years, the Singapore Government has introduced and tweaked a myriad of cooling measures, specifically the TDSR/LTV/ABSD/SSD in an effort to prevent the chaos in the market whenever an economic recession strikes, as typically seen during the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis.

In case you are wondering what those accursed acronyms stand for..

(Click on the following terms to find out more: TDSR, LTV, ABSD, SSD)

We have written more elaborate articles on the respective cooling measures to explain more in-depth how each of them have their role to play in market stability, so do feel free to click on the respective links to learn more.

These cooling measures have worked together to drastically impact the local property market, which was visible from the long slump spanning Year 2013 to early 2017, after TDSR dealt the deathblow to the bull wave.

On 11th March 2017, the Government lightened the SSD, perhaps giving the green light that our economic fundamentals has finally caught up to the market prices and hence resulting in the most recent bull until they shut it down again on 6th July 2018 with the ABSD increment.

Overall, the cooling measures generally allowed the local economic fundamentals to match up to genuine demand, as opposed to the previous 2 crises mentioned, where prevalent speculation was largely responsible for the collapse in property prices.

Additionally, the forced savings from the TDSR framework meant that Singaporeans generally had rather sizable amount of funds sitting in the bank, allowing them to seize investment opportunities when the time is right.

Factor #2: Covid-19 Temporary Measures Act

The Singapore Government was quick to pass the Covid-19 Temporary Measures Act, knowing that this crisis possesses the potential to cripple the economy and shut many businesses down for good.

Exact details of the Act can be found here

To save you from the agonizing read of the extensive bill, some key points to note would be:

- Rental allowed to be deferred (not waived) till 19 Nov 2020 Landlord not allowed to evict or terminate contract, but able to charge only interest rate over the period

- Bankruptcy Criteria raised substantially for both individual and company level - OTP, S&P & Lease granted by Housing Developers not allowed to be forfeited by the latter as long as the purchaser/tenant applies for relief to defer payments till 31st Dec 2020

- Automatic Income Tax Deferment for Corporate and Self-Employed for 3 months - Property Tax Rebate for non-residential properties mandatory to be passed from Landlords to Tenants.

- ABSD Remission for Married Couples extended from 6 months to 12 months, hence less urgency to sell

- ABSD Remission period for Housing Developers extended by a year, hence 1 additional year to sell New Launch units before ABSD deadline

- Mortgage Repayments allowed to be deferred until 30 June 2021, where only interest will be charged on deferred interest payments, reducing stress on owners to pay up if their income sources were affected.

These are some of the methods utilized by the Government in a herculean effort to cushion the economy, with the help of a gargantuan $100 billion through the Unity, Resilience, Solidarity and Fortitude Budgets.

Since developers and owners are not in a rush to sell, and many (of the remaining) businesses are still able to stay solvent with the relief measures, a large majority of the population were hence protected financially.

With the absence of property fire sales typically seen in previous crises, it seems there was very limited room for the Property Price Index to fall back on.

Factor #3: Developer Sentiments

During the short-lived bull market from 2017 to 2018 due to the easing of the SSD, developers were able to charge sky-high premiums for their units, as the market sentiment was exceptionally positive.

For instance, Twin Vew launched in early May 2018 was 85% sold just over the launch weekend.

You may be thinking…isn’t that same to what we seen recently in the second half of 2020?

Yes you are right. Except the profit margin for the developer back then was a ridiculous 41.88% on average!

Imagine a car dealer selling you a Toyota Camry at $140,000 during good times, when they acquired the stock for only $100,000. (Now this sounds familiar for some particular dealer..)

How would you feel?

On the other hand, after the intensified ABSD from 6 July 2018, housing developers have basically become more conscious in their pricing strategy in order to ensure that sales of new units remain consistent.

For example, this particular New Launch condominium are currently experiencing only a depressing 7.58% on average.

This means buying the same Toyota Camry analogy at only $107,500, instead of the previously advertised $140,000 during the pre-cooling measures bull in 2018.

Now before you go nuts over that $7,500 profit by the “developer”…come on developers ain’t no charity! They gotta make some profits for all the work done negotiating deals, coordinating and delivering the development!

But paying a $7,500 premium instead of $40,000 for the same product does sound much more reasonable in today’s market isn’t it?

Factor #4: Interest Rates

It is no secret that our local banks’ interest rate are mostly determined by the Monetary Authority of Singapore (MAS), which in turn, tends to follow that of the big brother in USA, the Federal Reserve.

In September 2020, the Federal Reserve Chairman Jerome Powell has announced that interest rates will likely be kept to near zero rates to encourage lending, so as to help boost the Covid-19-ravaged US economy.

While it isn’t a good thing to see businesses struggling to the extent that governments are encouraging lending, savvy investors would recognize that such extreme low interest rates are a blessing in disguise.

To illustrate the effect of lower interest rates, suppose we take a $1 million property purchase, 75% loan.

For the just a 1.2% higher interest rate p.a., we’ll need to pay $450 more a month in instalments,

Additionally, the true costs of borrowing lies in the interest payments, which amounts to $750 more a month.

This means we will need to pay $750 more a month just to own the very same $1 million property!

We suppose $750 can be very useful in our average day-to-day expenses.

Factor #5: Stock Market Windfalls

If you have been following the stock market, or an active investor yourself, especially on the tech sector, you may have seen unbelievable gains unheard of even during the Great Depression times!

Who ain’t smiling when Covid-19 made you the 2nd-richest in the world?

Those who hung on to stocks like Tesla and Zoom would have experienced astronomical gains in their portfolio value, like this $TSLA-naire guy who has been a diehard fan of Tesla for a long time.

Then you have gutsy people like these who stretch their loans extensively to “Go-Big-Or-Go-Home”.

Now you may be taking a step back…

“Why invest in properties when I can do way better in stocks?”

We are no experts in the stock market, but over there, there isn’t as many regulations as we have in our local property market.

While stocks have the potential shoot towards the stratosphere, they also have the potential to go other way, crashing back to penny stocks level if market sentiments go in the opposite directions.

On the other hand, in the Singapore property market, it is unlikely that we will see prices crash drastically, especially now that we have seen how the Singapore Government handled the situation during our worst-ever recession.

In addition, the high leverage made possible by 25% downpayment scheme, along with high market stability, makes it a perennial favourite of many people in and outside of Singapore.

After all, how many people will have the guts to invest hundreds of thousands of dollars towards the stock market for a mid-term outlook?

At the same time, will more choose to park their a large chunk of their savings in a local residential property or the stock market?

As such, this might have explained how our real estate market is still seeing an influx of New Launch buyers during recent times, as successful stock market investors are possibly looking to park their tremendous stock gains in properties as a safe heaven, amidst concerns of an overly -inflated “tech-stocks bubble.


In this Covid-19 crisis, we have seen the effects of:

- Cooling Measures

- Government Relief

- Developers’ Sensitive Pricing

- Low Interest Rates

- Well-Funded Investors

With all these factors stabilizing the market even during an economic crisis that effectively shut down many of our industries for a few months, it is hard to imagine something worse that can happen to actually trigger an even greater collapse in property prices.

Shrewd investors would be able recognize opportunities in times of crisis and act with logical thinking, instead of just following the crowd sentiment.

After all, the most well-known investor in the world always preaches…

However, this does not mean any property in the market is suitable to park your hard-earned money in.

The Singapore real estate market is not the same as it was previously before all the major cooling measures kicked in.

There are many properties out there, new or old, but not all are suitable for your actual needs in the long run.

Before acting on the information provided in this article, it is always best to engage and seek the opinion of a trusted and well-researched professional, as well as performing your own fair share of due diligence!


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