By Mr. Propwise

2020 has been such a surreal year. I haven’t done this for a while but think it’s worthwhile to take a look back at what’s happened over the past twelve months, then try and say something intelligent about the future direction of the property market over the next year.

2020 was the year of a “surprisingly stable market.” After a 1% decline in the URA’s Property Price Index (PPI) in 2020Q1 due to Covid fears, as of 2020Q3 we’ve seen a recovery past the 2019Q4 levels (153.8 vs. 153.6). And we’re just a small distance away from the 2013Q3 peak (of 154.6). This is despite the economy shrinking by 13.2% year on year and the unemployment rate rising by 0.5% to 3.8% in 2020Q2.

Contrast this to the 2008Q3 to 2009Q2 period where we saw a 24.9% decline in the PPI over four quarters. The current period is more reminiscent of the 2000Q3 to 2006Q4 period where the market fell gradually for a long period before recovering.

Figure 1 – The period from 2013Q3 to now looks a lot like the 2000Q3 to 2006Q4 period (Source: URA,

Policy still an overhang

We know the straw that broke the camel’s back was the MAS’ Total Debt Servicing Ratio (TDSR) framework introduced at the end of June 2013, which significantly limited the ability of buyers to lever up and buy property.

Another large deterrent to would-be property investors is the punitive Additional Buyers Stamp Duty (ABSD) imposed on second-time and higher Singaporean buyers and first-time PR and foreigner buyers.

Even now, despite the weak economy, the government seems ever ready to step in to clamp down on the market on any signs of “overheating”, as they did in September this year to clamp down on the reissuance of Options to Purchases for the same unit to the same buyers, which prevented developers from extending the purchase window and distorting property transaction numbers.

Figure 2 – Sadly, the STI has not gone anywhere over the last ten years (source: Yahoo Finance)

Stagnating stock prices (the Straits Times Index has had a flat return over the past ten years) and real incomes, a tight policy stance on the property sector, and an economy under pressure from Covid should all continue to be an overhang on the market.

But there are some positive tailwinds – a potential end to Covid with the availability of effective vaccines (although the new Covid strains are worrying), loose monetary policy and low interest rates globally, and strong interest by foreigners to move to and buy property in Singapore despite the punitive taxes have helped to support sentiment.

One could argue that the tight property market policies have effectively helped to contain the upward trend in property prices (interspersed with the occasional crisis) over the past few decades. Indeed, the quarterly price changes in the URA’s Residential PPI has been confined to a fairly narrow -1.5% to 3.9% range over the past ten years. This is well within the +/- 1 standard deviation range of -4.6% to +4.6% of the PPI since 1990.

For the property market to have a sustained upward rise we will likely need to see an easing of the current restrictive policies, but the government has indicated that the property cooling measures are here to stay until a meaningful correction has occurred.

So the million dollar question is – what does the government think a “meaningful” correction is?

Figure 3 – Change in URA PPI since 1990 (Source: URA,

We can get some clues from the previous three corrections that occurred from 1996 to 1998 during the Asian Financial Crisis, 2000 to 2004 during the Dotcom Bust, and then more recently from 2008 to 2009 during the Global Financial Crisis. During those downturns, the URA PPI corrected by 44.9%, 19.9% and 24.9% respectively. So, if I had to hazard a guess, I’d say the PPI would have to correct by at least 15% to 20% before the government would deem the correction to be “meaningful” and start easing some of those measures.

Reasons why the market could be weak in 2021

There are three reasons why the market could be weak into 2021.

First, rentals are stagnating. Unlike the Residential PPI which has been picking up, in the last couple of quarters rental growth has been negative. This will be an overhang on prices as property yields continue to decline.

Figure 4 – Rental Index Non-Landed Properties since 2000 (Source: URA)

Second, Vacancy Rates are climbing. They were up 0.8% to 6.2% in 2020Q3. This could put pressure on rentals if it keeps going up.

Figure 5 – Vacancy Rate of Private Residential Units since 2000 (Source: URA)

Third, large upcoming completions are likely to put pressure on both property prices and rentals, especially coupled with slower expected population growth as the government continues to be tight on the inflow of foreigners into Singapore.

Figure 6 – Upcoming private residential supply (Source: URA)

Based on URA data, as at 2020Q3 there was a supply of 50,369 uncompleted private residential units versus 49,090 units in the previous quarter. Of this, 26,483 units remained unsold.

But there are bright spots too

It is not all gloom and doom. There are also reasons to suggest that demand for private property could continue to be decent.

First, the HDB Resale Price Index (RPI) has picked up in the last two quarters, gaining 0.3% in 2020Q2 and 1.5% in 2020Q3. Rising HDB prices create a “wealth effect” that supports mass market prices as HDB flat owners can sell their unit at a high price and upgrade to a private condominium.

But I would caution that the longer-term trend since 2013 is still downwards, and the recent batches of HDB owners who have finished their Minimum Occupation Period (MOP) and are now looking to upgrade could find it difficult to do because they are still “underwater.” As a reference, over 50,000 HDB flats will reach the end of their MOP in 2020 and 2021, and about 50% of those that reached this so far have entered the HDB resale market in 2020.

Figure 7 – HDB Resale Price Index (Source: HDB)

Second, both developer and especially resale transactions have been strong. Developers sold 3,517 private residential units in 2020Q3 vs. 1,713 in the previous quarter, while there were 3,467 resale transactions in 2020Q3 compared with 933 units in the previous quarter. Sentiment is picking up, perhaps in anticipation of a post-Covid recovery.

Figure 8 – Resale and Sub-sale Transaction for Private Residential Units (excluding ECs) (Source: URA)

Finally, low interest rates globally are likely here to stay. We should keep in mind that one of the root causes of the buoyant property prices since 2009 is the protracted low interest rate environment after multiple rounds of Quantitative Easing (QE) by the US Federal Reserve post the Global Financial Crisis. This has propped up the prices of most yield-based assets, including property.

Figure 9 – US Fed Funds Rate (Source:

There was a move by the US Federal Reserve to normalize this from 2016 but that effort has been completely squashed by Covid and is likely to stay that way for the next several years due to the shaky economic outlook as we enter a gradual period of normalization. Also given rising national debt levels it will be difficult for the Fed to raise interest rates significantly as this will increase the debt burden of the US.

In Singapore, the 3-month SIBOR fell below 0.5% in 2020Q3 vs. ~2% in 2019Q3. Low mortgage rates will make the monthly repayments feel much more affordable.

What should buyers and investors do?

I do not like making forecasts about when or how much property prices will rise or fall, because I believe the exact timing and magnitude of property price movements are dependent on too many unknowable events.

But one clear trend to me is the changes that have been catalyzed and accelerated by Covid – such as the widespread acceptance of Working From Home, the growing gap between the wealthy and the poor (global markets have done well due to the continued injection of liquidity even as the economy and employment have suffered), and between the Covid Beneficiaries such as Tech and E-commerce and the Covid Losers such as bricks and mortar retail.

For the property market, this suggests that there will be also be a dispersion depending on which segment you are in – larger luxury units and landed property could continue to do well as the upper-middle class upgrades to a more comfortable home office setup and wealthy foreigners flock to Singapore, while the mass market could continue to languish as the overall economy and employment are still under pressure.

Finally, here’s wishing everyone a Happy New Year, and a Wealthy and (most importantly) Healthy 2021!

By Mr. Propwise, the founder of Singapore property blog, which aims to help people make better real estate buying, selling, renting and investing decisions.

[Disclaimer: The main aim of is to provide good sources of information and opinion on the Singapore property market for our readers. These sources come from a broad mix of experts, who could be independent bloggers, analysts, and real estate professionals. We do not publish anything we feel is overly promotional or lacking substance, and do not get paid to post articles (any ads you may see will be clearly marked). That being said, you should be aware that every guest contributor has their biases, and so you are less likely to see an article from a property agent (for example) that will be negative on the market.]

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