There are many interpretations, mindsets, comments about the property market which could be misleading.
Thus, this post today is our way of setting the records straight!
Why & How prices increased?
What happened in 2019? Covid! People were required to stay at home due to the pandemic. Thus, people bought up the big homes for the space. The majority of people pushing up prices of the market are Singaporeans, and not PR or foreigners.
Singaporeans needed bigger houses due to the need to stay home and accommodating everyone working or studying at home.
Without big ticket expenses like travel and vacation trips, there are people who find themselves flush with cash and having a bigger budget when looking at property purchases.
Traditionally, bigger units should have a lower psf price, but with the Boom in the market, the psf prices of bigger units went up on par or even higher to smaller units. This scenario has though been changing, with smaller units' psf prices increasing especially for 2 bedrooms units whilst 3 & 4 bedrooms psf prices have been stagnant since last quarter.
Covid Mentality
There was a fear of missing out in a Bull market. Buyers focus on the micro view, looking at the units transacted in the condo for the project they are looking at. Thus, buyers kept seeing record prices being reached, and thus are afraid that prices keep increasing and are fearful of being the next 'record setting' buyer.
Thus, these buyers pushed up the prices and they were willing to pay with the mindset that prices will continue to go up. They prefer to be the record setter 'now' rather than 6 months later.
Next, due to seller's stamp duty, property owners that have bought in 2021, 2022 would not be selling their units and thus shrinking the supply in the resale market.
Also, due to the constant record-setting news, sellers all want to be the next record setting seller. These sellers might not eager to sell, and are willing to hold till the offer matches what they are looking for. Even today, it's easy to see crazy prices in the forums and platforms.
What changed?
HDB prices went up higher in the same period, firstly as private sellers flush with cash were going to HDB property and high bids. At the same time, HDB sellers wanted high prices after looking at the trends in private property.
This then triggered the 30 September cooling measures, as there is a danger of HDB prices spiralling out of control too quickly. The 30th September cooling measures are significant due to the real impacts they bring about to the market. What is the impact? Buyers today will be waiting.
For those who are pressed for time, they would still buy, but most definitely not be willing to set any more record prices.
Predictions for 2023
With the uncertainty coming up in the news for 2023, as well as expectations of negative sentiments in the media, there are obvious hints of what could be coming up.
In 2022, high rental motivated the market and investors were not afraid to invest in the market. Now, with the cooling measures from September, buyers no longer have the fear of losing out, they are confident that the measures will work and prices will fall. As buyers are willing to wait, demand therefore drops.
If you are a seller now unwilling to lower your prices, it's okay, as other sellers will eventually drop their prices. Otherwise, some sellers will leave the market and decide to stop selling. A portion of these initial sellers are those affected by the cooling measures and unable to move from private to HDB. HDB sellers would also think twice about moving to private, if they are unable to move back to HDB in the future.
With demand and supply falling, alongside people returning to their travelling plans, there will be a stop in the market from December to January till after Chinese New Year in 2023. Therefore, with interest rates, cooling measures and the end year holidays, the market would be affected and prices are going to drop.
As a disclaimer, these predictions are the personal thoughts of Aaron for reference, and not to be taken as personal advice in any way.
As a quick tip, to see the impact of the cooling measures, check out the data of Q4 2022 and Q1 2023. Currently, sellers are troubled as there are less viewings and signs are abundant with agents doubling down with their advertising efforts and more.
Watch Aaron go through the reasons for the price boom in 2022 as well as share his thoughts on what's coming up in the property market from today till 2023!
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