As the coronavirus wreaked havoc in economies across the world, the International Monetary Fund (IMF) said it could trigger a global recession in 2020 which is expected to be worse than the negative 1.68 percent during 2009 global financial crisis. It is a timely reminder of the importance of diversifying one’s investments to prevent losses: A varied portfolio is crucial for stability, especially when markets become increasingly volatile. Yet another school of thought offered by BlackRock is that even investors with ready capital to deploy should focus on preserving values and incomes.
Real estate stands out as a particularly good hedge against volatility and excessive inflation, especially in well-governed countries like Singapore. Some inflation is always expected along with Gross Domestic Product (GDP) growth, but real estate investors can leverage this to build their wealth as property values and rental rates tend to rise during inflation.
Legacy also comes to mind when buying real estate. Legacy tends to have a long term horizon because one is investing for the next generation. Unsurprisingly, real estate is a popular form of inheritance in Singapore, especially because it is not subject to inheritance tax or estate duty. Besides, the property sector is relatively insulated from other industries such as retail and travel – which have nosedived during the pandemic.
Stable and secure Singapore
Singapore is known for her attributes of political and economic stability. The business-friendly and riots-free island nation is a safe haven for property investors. Despite the uncertainty caused by Covid-19, Singapore is likely to maintain her reputation as an attractive location. The Global Financial Centres Index (27th edition, March 2020) ranked Singapore as the world’s fifth largest financial centre, just ahead of Hong Kong. This could mean that more companies and businesses could be moving to Singapore to escape the new security ruling imposed by China.
Historically, many Singaporeans themselves have also invested in a second or third home as they become more affluent.
Despite the latest downward revision of Singapore’s economic growth forecast for 2020 to -7.0 to -4.0 percent, the recent measures of property tax rebates and rental waivers to combat the fallout from the pandemic shows that the Singapore Government is prepared to go all out to protect jobs to keep the economy afloat. This is what foreign investors will look out for – political stability and business-friendly policies during an economic downturn.
Over the past 25 years, various housing policies have been introduced to ensure market stability and to prevent spiraling home prices. They safeguard housing affordability while averting price bubbles, enabling some 90% of the resident population to own their own homes. These served to reinforce investors’ confidence.
Buyers have the upper hand
Since the implementation of the “circuit breaker” or partial lockdown from 7 April, developers have to scale back the launch of new projects because they are disallowed from opening their sales galleries. Even the viewing of homes belonging to private owners are disallowed. As such, there is a build-up of homes that are available for sale. When the circuit breaker is lifted, it is possible that developers will roll out more flexible pricing schemes or throw in sweeteners to sell their projects. Private home owners, who are in need to sell their homes to raise cash, would lower their price expectations to strike a deal. Against this backdrop, this may be an opportune time to invest in Singapore property, as experts have deemed the residential sector a “buyer’s market” for 2020.
Island of potential
In terms of location, there might be opportunities offshore on Sentosa Island, the country’s tourist attraction and resort island. Properties in the exclusive and luxurious Sentosa Cove – a gated community with fully manicured gardens and internal roads – are expected to see stronger interest as the area undergoes revitalisation. This is also the only location in Singapore where foreigners are allowed to buy and own landed homes. Sentosa Cove is unique because it is the only residential precinct that offers waterfront lifestyle, beautiful sea view and berthing facilities for private yachts.
In this time of chaos and uncertainty, the Singapore real estate market continues to offer stability and opportunity. During this time, there are many indications that overseas investors are heading to Singapore as they set up family offices as well as set up accounts in the domestic and foreign banks operating in Singapore. All else equal, Singapore may lead the Asia-Pacific region in global growth as we enter the post-Covid-19 recovery phase.