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The URA private property price index inched up a surprising 0.3% in 2Q 2020 against the backdrop of a Covid-19 induced recession. This is further evidence of the resilience in the market. The high national gross savings rate of more than 40% is helping the market to remain stable in times of crises.
The level of new sales continued to be healthy in light of the extenuating circumstances. The number of unsold units as the end of 2Q 2020 has decreased to 27,977 from 29,149 units in the previous quarters. Developers have continued to sell down their existing inventories and quite a number of mega projects are past the 90% sales mark. This bodes well for the market particularly the enbloc market as developers will have to acquire more land as they sell out the projects.
Resale volume made up only 35% of the total sales volume in 2Q 2020. The previous low in the resale market was in 2Q 2014 at 33%. Unlike the previous low, the resale market in 2Q 2020 was largely affected by the circuit breaker where no physical viewing was allowed.
Rental volume dipped below 20,000 in 2Q 2020, making it the first time since 4Q 2017 rental volume falls below 20,000. This is probably due to rising unemployment and border closure where the foreign hires are unable to start work. The third quarter of the year is usually the busiest but this year, we do not expect volume to pick up. Rents may ease up to 3% in 2H 2020.
In 1H 2020, developers have sold more than 3,800 units. For 2020, we expect developer sales to be between 8,000 and 8,500 units. This works out to 700+ units per month for the remaining six months which was the average monthly sales in 1Q 2020 before the circuit breaker. This is achievable because there are up to 20 new launches pencilled in for the rest of the year and July sales is estimated to be 900+ without a major launch. Prices could stay flat in 2020 barring unforeseen circumstances.
The HDB resale price index eked out a gain of 0.3% in 2Q 2020, slightly higher than the flash estimates.
During the circuit breaker where sales literally grinded to a halt save for a trickle of cases, demand from potential buyers was bottled up. This is made worse by the suspension of HDB open booking of flats. HDB upgraders to private properties on the other hand were given relief in the form of extension of ABSD dateline by six months. This bought the sellers time to maintain their asking prices against the heightened urgency of buyers.
With the relief measures expiring and the resumption of BTO and open booking of flats, the situation in the HDB resale market will stabilise. Resale volume is expected to be slightly lower at 21,000 to 22,000 in 2020.
