Huttons' comments on 2Q 2020 URA and HDB flash estimates
Despite the economy going into a partial lockdown in 2Q 2020 and possibly registering its worst quarterly contraction, the URA private property price index eased 1.1% in 2Q 2020, similar to what was registered in 1Q 2020.
This speaks volume of the strength and resilience of the property market built up since the last crisis in 2008. There are several reasons for this:
- High savings rate and a big increase in deposits in domestic banks
- Low speculation in the market of less than 1% in 2Q 2020 compared to 13% in 2008
- Prudence measures (LTV, TDSR) introduced by the Government since 2011
- Temporary relief measures (deferment of loan and 6 months extension for ABSD) provided by the Government in 2020
With the worst in 2Q 2020 behind us and the economy gradually returning to normalcy in 2H 2020, the property market should find its footing in 2H 2020. There may be concerns that the market is propped up temporary by the relief measures but we don't think so. We think the relief measures are a pre-emptive move by the Government to ensure the market stays stable.
If we look back at relief measures introduced by the Government in 1998, it was a boon for the property market. With the economy recovering in early 1999, the property market rebounded sharply.
Economic performance in 3Q 2020 is expected to be better than 2Q 2020 and that will give confidence to the property market. We think the property market will stabilise from 3Q 2020 and we think prices will ease around 3% in 2020.
For the HDB resale market, prices recovered by 0.2% in 2Q 2020. We would caution against reading too much into the prices as transaction volume in 2Q 2020 are expected to be 75% lower than 1Q 2020. Such low volume may not be representative of the entire market.
Nevertheless we expect HDB resale prices to be stable in 2020. The temporary relief measures (6 months extension for ABSD) will give upgraders more time to sell their flats and ensure a stable market.
Source: URA, Huttons Research