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Property price increases this year unlikely to result in housing bubble

Government’s property cooling measures will prevent housing bubble from forming

The President and CEO of CapitaLand Ltd, Lim Ming Yan, reportedly said in February that following a pickup in home sales, Singapore housing prices may rise as much as 10 percent in 2018. A housing bubble though is unlikely.

housing bubble unlikely
CapitaLand bought the Pearl Bank Apartments for S$728 million

Capitaland is the biggest developer in Southeast Asia. Mr Lim said that the increase in transaction volume is usually a precursor to some price increase. “A 5-to-10 per cent increase is possible this year barring any unforeseen major volatility in the capital markets,” he added.

CapitaLand bought the Pearl Bank Apartments for S$728 million through a private treaty collective sale. The iconic horseshoe-shaped residential building in Outram is among the latest development to be successfully sold on the red hot en bloc market.

Mr Lim is not alone in predicting increases in housing prices here. According to analysts at Credit Suisse Group, private home prices may rise as much as 10 per cent this year, while brokerage firms Morgan Stanley and OCBC Investment Research said that they expected 8 per cent increase in 2018.

One of Singapore’s largest real estate agencies, Orange Tee, has now weighed in on the topic if housing price increases and said that a housing bubble is unlikely to develop in Singapore despite the increases in property prices, fueled by higher land cost and robust demand.  Compared to the peak of HDB resales transactions in previous years, the HDB resale volume is significantly down now.

housing bubble unlikely
OCBC Bank Mortgage Loan
Image Credits: OCBC Bank Holland Village, Paul Ho,

OCBC noted that “Whilst the overall prices have escalated in recent months, the number of transactions remained low as compared to the high volume seen in 2007 and 2010-2013. 2,357 caveats were lodged in the first two months of 2018, lower than the last 10-year average of 2,542.”

The Government’s recent property cooling measures like Total Debt Servicing Ratio and Seller’s Stamp Duty will also prevent a housing bubble from forming.

With the sale of Le Nouvel Ardmore for $4,098 psf the average price for a luxury home rose to $2,049 psf. This is a 22 percent year-on-year increase for luxury homes.

Property prices for mid-tier homes also rose, but more moderately. With new sales, subsales and resales for mid-tier housing reaching record highs at $1,703 psf, $1,715 psf and $1,287 psf, respectively, the increase was modest.

For HDB flats, the resale prices came down by 2.4 percent.

Written by Ravi Philemon


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