Will the Singapore property price jump spur fresh cooling measures?

Singapore street scene in Holland VillageSingapore street scene in Holland Village.

The jump in Singapore’s private residential property prices in the first quarter has raised the risk of further regulatory measures to cool the housing market, Nomura said in a note dated Monday.

For the first quarter, the index for private residential property prices jumped 3.1 percent on-quarter, according to the flash estimate from Singapore’s Urban Redevelopment Authority on Monday; that was an acceleration from the fourth quarter’s 0.8 percent on-quarter rise.

But in the public housing market, the long price downtrend continued, with the Housing and Development Board (HDB) resale price index falling 0.8 percent on-quarter.

“This divergence suggests the rise in private home prices was not supported by a robust HDB resale market, which used to be a key factor in allowing households to upgrade to private housing,” Nomura said. “While some of the price increases may reflect owner-occupier demand boosted by recent en-bloc sales of private property, we suspect higher demand for investment purposes was a larger driver amid still high
vacancy rates of 7.8 percent in the fourth quarter of 2017.”

Nomura said the data may set regulators’ spidey senses tingling.

“We see a rising risk of macroprudential cooling measures as these latest property price data will likely raise the authorities’ discomfort
with a further increase in private residential property prices,” it said.

The city-state began implementing a series of cooling measures starting from 2011 as low interest rates globally spurred an inflow of funds into the property market. That had sent Singapore’s housing prices surging more than 60 percent between 2009 and 2013, sparking fears a bubble might be forming in a market that has a long memory of the late 1990s Asian Financial Crisis and the resulting property crash.

Nomura also pointed to concerns over overstretching the financial system.

“With household debt at 72.3 percent of GDP, mortgage loan growth creeping up again and interest rates rising, authorities remain
watchful of financial stability risks, in our view,” Nomura said.