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Discussion – 


Discussion – 


How will Singapore emerge from this COVID-19 crisis?

Singapore covid crisis

Singapore covid crisis esplanade couple in mask

As Singapore starts easing its circuit breaker measures, the question on many people’s mind will be on how will Singapore emerge from this COVID-19 crisis.

Since the outbreak of this pandemic, many countries, including Singapore, had to contain the virus by implementing strict social distancing measures.

As a result, many businesses suffered as many people forced to stay home. Airlines, hospitality and tourism all grind to a halt with travel restriction.

Public transport and the roads were visibly devoid of commuters since many people are working from home. 

Global supply chains were disrupted, initial with the factories in China shut. It then gradually spread to the rest of the world following the footsteps of the coronavirus.

As the COVID-19 infections peaked and taper across the world. Many countries are starting to reopen their economies.

Many are wondering how the post-COVID world will be like. What if there are next waves of infections, or when a vaccine can be created and the changes to the social-economic landscape.

Emerging from past crisis

A young and unendowed nation, we are more susceptible to crises than larger countries. We do not have natural resources nor a vast hinterland to fall back on during tough times.

singapore covid crisis

In fact, our gavest crisis was when we had our independence thrust upon us when we were kicked out of the Federation of Malaysia. We survived, and thrived, by the sheer grit and hard work of our forefathers.

Being a nation highly dependent on international trade, we are acutely affected whenever any of our trading partners suffer a recession.

We had our first ever recession in 1985. Then came the Asian Financial Crisis (AFC) in 1997. Following that was a series of events that also cause a crisis of sort starting with the Dot Com Bubble bursting in 2000, September 11 terrorist attack, then SARS in 2003. 

After the recovery from SARS, then came the Great Financial Crisis of 2008. Of course, there are a few other crises that I have omitted, like the Iraq war etc, that also affected us in one way or another.

Government spending and political stability

Other than the strength and resilience of her people, Singapore is also fortunate to have fairly good leadership. The government’s track record of steering the country and economy through storms is admirable. 

Take the example of this current crisis. The government has acted swiftly and decisively to inject an unprecedented amount of stimulus and support for businesses and people affected by the pandemic. 

singapore budget 2020 to support covid

Of course, there were some areas where they fell short and could have been better. But overall, I would say the measures were balanced between saving lives and livelihood. The share of the economic pain was distributed fairly equitably from the man in the street to businesses to the banks and also the taxpayers.

Moreover, this crisis happened just before the impending election. I would think there is even more pressure to do a good job. This is evident from the rather generous and forceful support measures rolled out. I won’t cover the details here but I have written about the various measures in my update to 2020 outlook article.

In his recent address to the nation. Prime Minister Lee assured us that despite the immense challenges facing us, “Singapore will emerge stronger and better from the COVID-19 crisis”

A resilient and competitive economy

Is our economy robust enough to withstand this shock? Are we sufficiently diversified such that we are not too overly dependent on one or a handful of sectors? 

Take for example the island nation of Polynesian Cook Islands. It is almost completely dependent on tourism and had to sacrifice its economy to end the coronavirus

Compared to our early years, we are increasingly concentrated on services. However, we are not unduly dependent on services. We are at about the 70% mark while the city of London is almost over 85%.

Are we also too reliant on global trade? Unfortunately, we are. Not out of choice but because of circumstances. Therefore, incidents such as the recent US-China trade war will negatively affect us.

That said, however, looking at the world competitiveness ranking. I observed something interesting.

singapore competitive ranking
World Competitiveness Ranking 2020. Source: Institute of Management Development, Switzerland

Both the US and China dropped in their ranking because of the trade spat.  And so did Hong Kong because of its social unrest. Singapore, however, kept its first-place ranking for the second year!

The ranking is based on hundreds of indicators ranging from employment, cost of living, government spending, political stability etc.

Factors behind Singapore’s success are its strong economic performance which stems from robust international trade and investment, employment and labour market measures.

Stable performances in both its education system and technological infrastructure – telecommunications, internet bandwidth speed and high-tech exports – also play key roles.

– Source: Institute of Management Development, Switzerland

Employment – the lagging indicator

Strong employment will give rise to a steady income. And with a steady income, banks are more willing to lend money. As a result, income together with debt will increase spending. 

One person’s spending is another person’s income. And thus the cycle goes leading to economic expansion. 

As with any crisis, there is bound to cutbacks, retrenchments and loss of income. This will have a reverse effect. Those with high debt loads will face difficulty in paying back their debt. 

When debt is not repaid, the cycle will reverse, causing a reduction in income. 

singapore unemployment rate chart
A chart of Singapore Unemployment Rate

Although the unemployment figure is trending up starting from 2016, it is currently below two and a half per cent, still below the historical average. In addition, it is considerably below the levels reached during the AFC (around 3%) or the aftermath of Dot Com and SARS where it hit a high of almost 5%.

However, the government has indicated that they expect the unemployment figures to cross the 100,000-mark by the end of the year 2020. 

Healthy household balance sheet

Here we can see we are entering the crisis with a reduction of debt. Household liabilities started coming down slightly starting in 2019. This is a good sign.

Hopefully, the liabilities we are carrying into this crisis won’t be too high to bear and we can come out of this relatively unharmed. 

Singapore Household Asset Liability Net Worth
Changes in Singapore’s household Asset, Liability and Net Worth

If the spread of the virus can be under control, and the economy reopens. Hopefully, economic activity will pick up and start to recover. When a vaccine can be found, it would also help bring back confidence to resume pre-pandemic activities.

Nationally, we are also in a healthy position when it comes to debt. Over the years of prudent spending and saving, we have built up a sizable reserve which we could tap in this crisis. 

How will the property market emerge from this crisis?

Other than the financial market, the next market any investor ought to look at would be the property market.

Changing demography


singapore population chart
Chart of Singapore population

The property market is primarily driven by demographic factors. Why are demographic factors important? A growth in population is necessary to support an economy that is highly dependent on the service sector, a larger population also produces more gross domestic product. 

Lastly, a growing population translates to an increase in demand for real estate. Be it residential to commercial and maybe to a smaller extent, industrial. 

Although the local population isn’t growing organically, the government is supplementing this by immigration. 

September 2020 update, post-election: Singapore’s total population fell to 5.69 million or a drop of 0.3% for the first time in the past decade. The drop is mainly attributed to the non-resident population. 

This will have an impact on the rental market of HDBs as most of the reduction came from foreigners employed in our service sector holding work permits. 

Cooling measures – boon or bane?

A series of cooling measures that reduce overleveraging (TDSR / MSR), discourages hoarding (ABSD), speculation (SSD) and foreign ownership of land. All these serve to keep prices in check and in line with incomes. 

The authorities have been very active and timely in their introduction and relaxation of the various measures in response to the changing market condition. Thus ensuring that the property market remains stable.

The ABSD taxes were also tweaked to encourage owner-occupation. So there is less oversupply of rental or investment properties that will depress prices when the rental market heads south.

Some have asked whether will we see a relaxation of the cooling measures. Unless we see a sharp price drop in excess of 5% in a very short period of time. Or, a prolonged slump in volume, I doubt we will see a relaxation of the cooling measures. 

Homeownership as a ballast

Properties are largely owned by locals. As high as 91% own their own homes. As compared to many other countries around the world. This gives the people a stake in their homes and country.

As many are also owner-occupiers, they have no reason to bail or fire sale their homes, thus lending the market a measure of stability. However, of the three regions in Singapore – namely the CCR, RCR and OCR. The CCR will see the highest volatility.

Inflationary pressure

Our quest for new properties and a national drive to constantly rejuvenate ageing buildings through en bloc redevelopment creates natural price inflation. 

And through this pandemic episode, I foresee there will be a greater and more urgent push to reduce reliance on foreign labour. This will increase the use of automation which will undoubtedly increase the cost of construction. 

Even in the short term, with the need to house our foreign workers in less crowded living quarters with better sanitation will also create heighten manpower cost pressures. 

Funds inflow

There are numerous reports recently that points to the fact that Singapore remains very attractive to foreign investors.

chinese luxury property

One such report notes that there was a jump in funds deposited in our banks and the funds originated from places like Hong Kong. Foreign currency deposits increased fourfold to $27 billion in April compared to a year earlier.

In addition, real estate agents have been noting an increase in wealthy Chinese investors parking their funds in luxury properties as they shield their wealth from the pandemic.

Lower interest rates

As the world pump an unprecedented amount of stimulus money into the economy. Coupled with lowering the interest rates to near nothing. This is helping to push up asset prices. 

It is also helping people with existing debt, be it mortgage or a business loan, to be able to afford the repayment. All this is ensuring there is sufficient liquidity in the system.

In Singapore, the Ministry of Finance introduced a total of four budgets, namely the Solidarity, Unity, Resilience and Fortitude Budgets to address these extraordinary circumstances. 

These budgets serve to ensure jobs are not lost. Businesses can ride through this tough period. Tenants and Landlords can remain afloat before normal activity can resume. Support measures during COVID


Would we be able to bounce back from this storm given all that we have discussed above? In previous crises we bounced back within 2 to 3 quarters, how would this be any different? 

If history is any guide, I’d say we will be alright. Our people and our leaders will manage this crisis as we dealt with those before. And we will emerge stronger than before.

“History doesn’t repeat itself but it often rhymes”

– Mark Twain

Everyone’s situation is different. Many clients, buyers, owners, landlords and tenants that I have spoken to recently are affected in one way or another. Some worse than others. 

Should you like an assessment of your situation, to see what are your options. Feel free to arrange a meeting. You can start by clicking on the available dates below and select a convenient time slot.

farrand ashlyn

About The Author

Farrand Hey writes to share his experience gathered over the last decade of serving homeowners and investors. 

He is passionate about helping the younger generation plan for their future and grow their wealth.  

His clients and colleagues alike frequently sought him out for his unbiased and honest views. 

When he is not busy with work or writing, he loves to cook and watch reruns of Top Gear.

Farrand also makes it a point to stay healthy through exercise as health is wealth. Although he finds it hard to resist the lure of tasty food.

Recently married, he is still basking in marital bliss.

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