Hungry Ghosts and COVID-19 Not Scaring Away Singapore Home Buyers

By Lee Kah Whye
Singapore, September 21 : Last month, Singaporeans snapped up property at a rate not seen in two years in spite of the Chinese "hungry ghost" seventh month and the economic downturn triggered by the COVID-19 pandemic.
1,047 new non-landed private residences (mainly flats and condominiums) were sold to Singaporeans in August, which is the highest figure for such properties sold to locals since July 2018. This surprising surge in property transactions has intrigued observers given Singapore economy's 13.2 per cent decline in the second quarter as well as the one per cent fall in property prices in the same period.
Furthermore, August is typically a slow month for property sales because most of August coincides with the Chinese lunar calendar's seventh month. This is an inauspicious time for Chinese, who make up about 76 per cent of Singapore's population, to conduct business and make large asset investments - for example purchases of houses or cars. In Chinese tradition and folklore centred around ancestor worship, during the seventh month, the gates of hell are opened and ghosts who may be deceased ancestors are given permission to roam to earth to look for food and entertainment.
To assuage these "underworld beings", the living would "celebrate" by burning joss paper, making food offerings, entertaining the ghosts through concert and stage performances and holding auctions of items like statues of deities, food hampers or TV sets, which have been blessed by priests or monks.
A total of 1,256 new non-landed private homes were sold in August this year to both locals and foreigners, making it the best August sale number since August 2012 when 1,427 units were transacted. According to the developers' sale survey by Singapore's Urban Redevelopment Authority (URA), private new home sales, excluding government-built housing, rose 16.3 per cent month on month from 1,080 units in July. Year on year, private home sales grew 6.5 per cent from 1,179. The number of units transacted was also at the highest level in 11 months and August represented the fourth consecutive month of higher sales.
Based on analysis by the research and consultancy arm of real estate firm OrangeTee & Tie, August property sales consisted of 49.5 per cent of units sold in the Rest of Central Region (RCR), 40.3 per cent in the suburban or Outside Central Region (OCR), with the remaining 10.2 per cent in the Core Central Region (CCR).
Singapore divides the island into three regions for statistical purpose in reporting property transactions. CCR covers areas popular with foreigners like the Central Business District (CBD), Orchard Road, Tanglin, Bukit Timah, Holland and Sentosa. RCR includes locations like Buona Vista, Toa Payoh and Queenstown.
August 2020 also saw the highest number of new non-landed properties launched by developers in over a year with 1,582 units made available for sale compared with 911 in August 2019.
Last month also saw the highest monthly sales volume of non-landed property sold to Singaporeans in two years. 1,047 or 83 per cent of non-landed homes were bought by Singapore citizens beating every month since July 2018 when 1,237 new units were bought by locals. The remaining 17 per cent were bought by permanent residents and foreigners. This is higher than the 9 per cent long-term average for property transactions by foreigners.
OrangeTee & Tie in their developer monthly sales analysis noted the increased interest from foreign buyers in the Singapore property market. Based on their data, the number of new non-landed homes bought by Singapore permanent residents rose to a two-year high of 139 units and foreigner purchases hit a seven-month high of 54 units last month. In the last three months from June to August, foreigners bought 421 non-landed homes in Singapore surpassing the sum of transactions in the preceding eight months.
Based on 2017 statistics, Chinese nationals form the largest group of foreigners buying a property in Singapore. Indians rank fourth after Malaysians and Indonesians.
Although the latest figures do not provide a breakdown of property purchasers based on nationalities, based on anecdotal on-ground observations, analysts are speculating that the bulk of foreign buyers in the last few months could be mainland Chinese looking for a safe haven for their assets.
"The passage of the national security law, as well as uncertainty from the recent increase in US-China tensions, could be possible reasons for the jump in transactions by mainland Chinese buyers," Christine Sun, head of research and consultancy at OrangeTee & Tie was quoted by the South China Morning Post as saying.
Despite the punitive 20 per cent additional buyers' stamp duty (ABSD) slapped on foreign purchases of Singapore property, many high net worth foreigners still believe that Singapore property is a good investment. Foreigners can only buy properties such as condominium units, flats or apartments or strata landed house in an approved condominium development. They are usually not permitted to buy landed residential property.
Besides, increased foreign interest in Singapore property, another reason for the uptick in property purchases is the pent-up demand built up during Singapore's pandemic lockdown (locally called "circuit breaker") from 7 April to 1 June. New families and residents looking for new homes earlier in the year had to wait for a couple of months before starting to house hunt as property marketing activities went into a hiatus and show flats closed.
In addition, Singaporeans consider property as a relatively secure alternative asset class and a good hedge against inflation. Especially with the backdrop of increasing economic uncertainty and the volatile financial markets coupled with a low-interest-rate environment.
Despite the increase in demand, property prices in Singapore have remained relatively stable. Singapore's URA data showed that overall prices of private residential properties increased just 0.3 per cent in Q2 2020 compared with a one per cent decrease in the previous quarter.