_Knight Frank Asia Pacific research wrap up: March 2020

Singapore new home sales up 57% month-on-month in Feb despite COVID-19

Singapore developers sold 975 units in Feb, up 57% month-on-month and 114% year-on-year month-on-month, as home buyer demand held up in a low interest rate environment; the 3M SIBOR rate has fallen to near 1% from around 1.75% at the start of this year. Furthermore, supporting this were the 933 units launched last month of which two thirds were in the Core Central Region (CCR) and competitively priced. Going forward, while a repeat performance in March is unlikely given the current volatility, we expect Singapore’s residential market to remain resilient as investors flock to relatively safer asset classes.   

Need to quarantine a new source of demand for hotels in Asia

The fall in tourist arrivals across Asia since the start of 2020 has, not surprisingly, impacted the hotels sector significantly. In Singapore for example, average occupancy rates across its hotels fell from 83.1% in Jan to 51% in Feb, while revenue per available room (RevPar) in Feb was down 40% to S$117.1. However, there are some short-term relief as returning overseas residents who need to be quarantined, either self or officially mandated, have become an unexpected source of demand. Singapore is expecting to see 200,000 overseas residents return while Hong Kong has recorded 77,000 returning so far. Nonetheless, the lack of tourists, business travel and MICE activities will put downward pressure on the overall hotel sector, but the impact will be lesser on the mid and lower tiered properties.

China new home sales fall 35% in Jan Feb

Total contract sales for new homes ex. subsidized affordable housing fell 34.7% year-on-year to Rmb719.8 billion (US$102.8 billion) in the first two months of 2020 as a result of the virus outbreak. Prices in Feb were up 5.8% year-on-year, slowing down from the 6.3% rise witnessed in Jan. With China’s real estate sector and its related industries accounting for 25% of the economy, its recovery will play a pivotal role in reflating the country’s growth. While we do not expect any major easings to its current strict purchasing policies, we believe support will come in the form of easing credit access which should provide a baseline support for the sector.