Singapore home prices rise most since 2018; curbs may loom

·2 min read
Super crowded but modern residential area in Singapore. People live in small compact smart home apartments close to the neighbour. This aerial view shows the Keppel Bay area in the southern tip of Singapore.
Singapore’s private property prices increased 3.3% in the first quarter of 2021, according to URA. (PHOTO: Getty Creative)

By Faris Mokhtar

(Bloomberg) —Singapore’s property frenzy continued last quarter as home prices grew more than expected, fuelling concerns that authorities may step in to cool the market.

Private property values increased 3.3% in the three months through March, the Urban Redevelopment Authority said on Friday. That’s higher than the preliminary estimate of 2.9% and the biggest gain since the second quarter of 2018.

Singapore’s property market has been heating up in recent months as buyers capitalise on low interest rates and expectations that prices will climb further after the economy recovers. Values of public housing flats and luxury homes have also jumped, with some breaking records. Sales of private homes reached the highest level in almost a decade.

The latest price increase is stoking concerns that authorities may impose cooling measures for the first time since 2018. Government officials have warned that low rates can distort asset prices and the property market shouldn’t run ahead of economic fundamentals.

“There is that possibility if prices shoot up too much, the authorities may step in earlier,” said Nicholas Mak, head of research and consultancy at APAC Realty Ltd. unit ERA. “But imposing cooling measures at the wrong time may also slow down economic growth at a time where there are still uncertainties.”

Singapore joins other countries seeing a property boom. New Zealand removed tax incentives for property investors, while China has issued a slew of steps to rein in developers and bank lending to the sector.

Growing market confidence, a fear of missing out, low rates, ample liquidity and the risk of additional curbs may further motivate buyers to rush to purchase. As a result, the private residential property price index could increase by 7% to 10% this year, Mak said.

“A recovering economy and still-low mortgage rates may propel demand and prices of private homes further,” said Christine Sun, senior vice president of research and analytics at OrangeTee & Tie.

Sun expects prices to rise between 6% and 9% this year, barring new cooling measures or unforeseen circumstances. With more luxury and city-fringe projects slated to be launched, an increase in sales of such homes may lift the overall residential price index in the next few quarters, she said.

(Updates with analyst’s comments in the fifth and eighth paragraphs.)

© 2021 Bloomberg L.P.