A macro outlook on the Singapore property market

Chua Soon Hock /

Despite a number of cooling measures from the government in the past year, the Singapore property market continues to be strong, hitting all-time high in prices. A recent prime condo traded at new record high of $5,842psf.

This resilience is/was due to both domestic and global factors:
1. Bullish contradictions in economic and social policies in the form of very aggressive immigration policy, the more liberal approach to PR purchasing GCBs and prime properties in Sentosa, the relative slow increase in supply especially in HDB public housing and the mark up of prices in new HDB flats. These domestic factors provided strong underlying support and the base to the uptrend in property prices across the board.

2. Global inflation from aggressive monetary policy by central banks led by the US Fed and China resulting in capital flows into commodities and other hard assets including properties. Singapore with its open economy inevitably becomes a recipient of these fluid global flows, part of which find its way into the local property market.

3. The huge phenomenal increase in the number of Asian high net worth individuals especially from China and India, who look to diversify their risk and investments through private banking centres like Singapore and Hongkong, thereby parking some of their funds in local properties.

Given the landmark political election in Singapore, it is highly likely that the domestic bullish contradictions in economic and social policies will be addressed. Aggressive immigration will likely be much moderated, a more stringent approach towards foreigners and PR purchasing properties may be
considered and HDB public housing pricing policies toward better affordability for Singaporeans will be addressed to help its citizens cope with high costs of living. These likely forthcoming measures will have dampening effects on local property prices.

However, the global factors will continue to be very bullish and mitigate the bearish effects until such time when the US Fed decides to reverse its extremely loose monetary policy.

It may be instructional for policy makers and Singaporeans to study the history of the formation of the huge and long Japanese property bubble, its burst (20 years and still going on) and its after effects and learn a few lessons:

1. Big property bubbles do not benefit citizens in the long run, instead they may be harmful. While the party of paper wealth creation is ongoing, things all look very good but they are hollow and superficial. A relative massive wealth distribution is part of the many problems (eg low productivity), where a few savvy players gained much when the game is over with many others having purchased at or near the peak and an indebted generation suffering serious financial consequences subsequently.

2. The bigger and longer the bubble, more likely the bigger and the longer the

3. The peak of the bubble will usually coincide with high costs of living, high economic growth, with the timing being near the peak of the total population with insane valuations.

If Singapore’s peak population is 6.5 million, then maybe we may want to consider stretching the time to reach this peak as long as possible (over 30 to 50 years) to sustain gradual positive economic and social development for its citizens. More haste, more mistakes. May I also add more aggression likely more volatility.