Singapore’s Property Market in 2021: Everything an Investor Should Know
There is no arguing the fact that the COVID-19 crisis of 2020 hit all economies hard. Even real estate, a traditionally safe investment option, suffered from the pandemic and restrictions it imposed. However, while some property markets were hit, Singapore’s only keeps growing stronger. As more investors around the world are recognizing this opportunity, more roads open up for them. One of the most remarkable developments is the growth of the online international money transfers sector. The companies operating in this niche offer an alternative to banks and reduce currency exchange-related risks and costs for foreign investors.
The great economic recession of 2020 is truly unprecedented in its scope. Therefore, it’s impossible to forecast its impact with any precision. However, one thing remains true and it’s that real estate remains a good investment even in these trying times. Singaporean real estate, in particular, is in high demand and the market is only growing stronger.
It definitely helps that the Singapore’s property market is versatile and that demand is high in all of its sectors. In fact, the demand quite exceeds the offering even with the recent BTO sales exercise by HDB. This is one of the major reasons why despite the many negative economic consequences of the COVID-19 crisis, real estate in Singapore keeps attracting investors.
That said, the market was heavily affected by the crisis. There were no showflats and physical viewings as well as construction works were shut down. This caused delays in construction, which only made the market hotter. But first, April of 2020 was one of the worst for the Singapore’s real estate market in recent history.
The market recuperated fast after the dip, largely due to the US government’s release of $700 billion as a stimulus package and a sharp drop of interest rates to record lows. The result is that prices on the market kept growing in spite of the deepening global economic recession. This trend is one to watch because it’s very different from how things usually go during periods of economic volatility. However, now it’s evident that the market won’t be weakening any time soon. This helps investors by offering some stable outlook on returns regardless of the recession.
The most popular types of properties in Singapore in 2020 were the more affordable units in the RCR and OCR. Low mortgage rates also motivate many residents to refinance.
One of the developments from 2020 was a reduction of the confirmed Government Land Sales due to the slow down resulting from the pandemic. This will have implications for 2021 as the rate of new property construction will remain lower.
The foremost factor that real estate investors should consider in 2021 is that the COVID-19 induced changes in buying preferences will remain. The main among those is the preference for large suburban properties and need for lower prices. The latter is aptly assisted by the fact that mortgage rates will also remain low for a while.
Another important factor to consider is that foreign investors might take a bigger interest in the market. It’s currently dominated by local buyers (making over 80% of purchases currently) and this trend will not be broken. However, the global situation and great performance of the Singapore real estate market in a crisis make it more attractive to foreigners. There are also additional developments that will help facilitate international investment.
HDB resale flat prices will keep growing even as the number of units on the secondary market is increasing. The demand for property is also to remain resilient as it’s mostly driven by genuine owner-occupiers.
It should also be noted that developers will be looking at failed en bloc sales. This might become necessary due to the restriction on the release of new land for construction projects in 2021.
With the interest rates close to zero on mortgages, the market is sure to become even hotter. It’s true that this crisis will put some strain on businesses and overall the level of consumer spending is down. However, many people are savvy and see that this is a one-in-a-lifetime opportunity for real estate buying. The rates might stay at the new low up to 2023.
Foreign investments in the Singapore real estate market will not dry out. In fact, they are bound to increase in 2021. The Singaporean Government’s policies are very open, which creates a favorable environment for investors. However, one also needs to note the growth of international money transfer companies in the local market. Industry leaders are opening new local offices like TorFX Singapore and AirWallex. They will give investors more affordable and safer routes for financing their deals.
The government clearly understands the importance of attracting foreign investment. This is why foreigners have so few issues purchasing property in Singapore. As this can be done with minimal legal requirements, investors have a wide selection of choices and good overall terms.
There are also many advantages of investing in Singaporean property that go beyond its stable and positive performance in the latest crisis. One of them is the fact that the whole state is a growing business and technological hub. With the trend for remote work set to continue post the pandemic, Singapore will become even more attractive place of residence for people from all over the world.
Already there are well-developed, stable, and solid essential and high-value sectors, such as financial infrastructure, telecommunications, transport infrastructure, pharmaceuticals, etc. This means that Singapore is a great place to live and its economy is growing more resilient despite its reliance on international exports.
There is also the matter of the Singaporean Dollar to keep in mind. USD, the world’s foremost reserve currency is weakening. This trend is not likely to stop as the country’s economy remains unstable. However, this downturn for the USD is actually strengthening the Singdollar.
The investors of 2021 are taking more risks and interest in non-traditional safe havens. Singapore is at the forefront of their interests.
The input of international money transfer companies (often referred to as FX brokers) is an important factor for the real estate market. This is because these companies make buying properties cheaper and easier for foreigners. This means there will be more activity from highly interested international investors. In turn, this will affect real estate prices and demand levels.
To get some idea of how important this is one needs to consider that a bank transfer can cost up to 3% of the transfer volume and up. It also offers no protection from unexpected changes in foreign currency exchange rates.
International money transfer companies, on the other hand, offer transfers that cost under 1%. Moreover, they can allow you to exchange currencies at nearly mid-market rates. This means that the investor will get the best possible deal. They also offer hedging as a way to protect from foreign exchange markets volatility.
Overall, foreign investors will now have even more incentive to buy residential real estate in Singapore.
Times might be tough now for many, but this situation also offers a prime opportunity for a savvy investor. Buying real estate in a crisis is not a choice you would regret, especially as the Singapore market is stable and growing.
Foreign investors, in particular, can use this opportunity as international money transfers become more affordable. More FX brokers are opening offices in Singapore to offer a broader range of safe, secure, and affordable services.
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