Real estate market sentiment moving towards cautious optimism: NUS

By Charlene Chin / EdgeProp Singapore | October 29, 2020 4:41 PM SGT
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SINGAPORE (EDGEPROP) - Despite the economic uncertainties, the real estate market sentiment in Singapore is shifting towards “cautious optimism”, according to quarterly findings of the Real Estate Sentiment Index (RESI) published by National University of Singapore Real Estate, which measures the perceptions and expectations of real estate development and market conditions in Singapore.
SKYLINE GRANGE PATERSON ORCHARD - EDGEPROP SINGAPORE
Although performance has improved in the suburban residential sector, outlook for the office, retail and hotel industries remains subdued (Credit: Samuel Isaac Chua/ The Edge Singapore)
The Current Sentiment Index, which tracks sentiment changes over the past six months, improved from 3.1 in 2Q2020 to 5.3 in 3Q2020. The Future Sentiment Index, capturing sentiment changes in the next six months, went up from 4.3 in 2Q2020 to 5.4 in 3Q2020.
Meanwhile, the Composite Sentiment Index, comprising the Current Sentiment Index and Future Sentiment Index, increased from 3.7 in 2Q2020 to 5.4 in 3Q2020, reflecting broad optimism for improvement in the property sector. The last time the Index crossed the 5.0 mark was in 2Q2018.
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Optimism in the property market is not broad-based, however. Although performance has improved in the suburban residential sector, outlook for the office, retail and hotel industries remains subdued.
RESI uses a ““net balance percentage” approach to reflect market sentiment, with a positive net balance indicating optimism and a negative net balance showing the opposite.
RESI - EDGEPROP SINGAPORE
The Industrial/logistics and suburban residential sector recorded positive current net balances of +31% and +29%, respectively. In contrast, the office, hotel/serviced apartment and prime retail were the worst performers with negative current net balances of -69%, -65% and -63%, respectively. These three sectors were adversely impacted by the safe-distancing measures and travel restrictions imposed.
Looking ahead, the industrial/logistics sector leads other sectors with a future net balance at +24%. The other sectors that registered net positive balances are suburban residential, business park/hi-tech space and suburban retail with the scores of +10%, +6% and +4%, respectively. The office and prime retail sectors have the lowest future net balances of -47% and -35%, respectively.
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RESI - EDGEPROP SINGAPORE
Nearly all the respondents agreed that the job losses/decline in the domestic economy (100%) and slowdown in the global economy (96.2%) are the top two potential risks for the property market in the next six months. Some respondents commented that these two risk factors may put pressure on prices and sales.
The proportion of respondents indicating high construction cost as a potential risk factor increased from 69.2% in 2Q2020 to 76.9% in 3Q2020.
Additionally, the number of respondents indicating the potential risk of government intervention to cool the market increased from 5.8% in 2Q2020 to 19.2% in 3Q2020, which is the highest quarter-on-quarter increase among the risk factors indicated by the respondents.
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In contrast, the proportion of respondents who indicated the tightening of financing/liquidity in the debt market as potential risk factors decreased from 46.2% to 38.5%.
In 3Q2020, about 68% of the developers surveyed expected new launches to maintain the same price level, while 48% of the developers surveyed expected the number of units launched to be moderately or substantially more in the next six months.
On the other hand, 85% of the respondents felt that the new restrictions imposed by URA on the re-issue of the Option to Purchase (OTP) on the market would marginally and negatively impact the new sales volume, with most believing that this would impact HDB upgraders the most. These are homeowners who wish to sell their HDB flats and use the proceeds to purchase a private property.
RESI - EDGEPROP SINGAPORE
The new ruling took effect on Sept 28, which outlines that the OTP of a property will expire three weeks after the Sale and Purchase Agreement (SPA) and copy of the title deeds are delivered to a potential home buyer. This also means home buyers would risk forfeiting 25% of their booking fees if they commit to new property purchases without securing the necessary finances upfront.
In terms of new sale prices, 63% of the respondents felt that the new ruling would only have a marginal negative impact on the figures, while 29% of the respondents felt that it would not impact launch prices at all.
RESI - EDGEPROP SINGAPORE
With the widespread practice of work-from-home, 54% of the respondents indicated that should buyer preference change in the future, more homeowners would prefer space that can be repurposed or reprogrammed.

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