5 things that could cause Singapore home prices to surge 12.6% this year

Analysts expect prices to increase by 5.5% but there is a high chance of overshooting.

According to Savills, the buoyant private residential market and resilient property prices amid the challenging market conditions has garnered the attention of the government, who have commented that they are monitoring the market closely. This caused market observers to second guess that there will be an additional round of cooling measures, the last being as recent as July 2018.

As countries start to administer vaccines to their citizens, it is anticipated that infection rates will be reined in soon. If the next steps will be a reopening of borders, allowing foreigners to enter Singapore, sales of private residential properties are expected to increase as there is very likely pent-up demand from such investors.

Here’s more from Savills:

With the residential land supply and unsold stock gradually diminishing, as well as various demand drivers working in favour of developers, private residential prices are expected to continue increasing over 2021.

For 2021, we expect prices to rise 5.5% with a high chance of overshooting. Prices are expected to rise because they have traditionally closely tracked GDP growth and GDP growth is expected to resume in 2021. However, prices may overshoot with a one standard deviation upside bringing the increase to 12.6% YoY. The reason that they may increase faster than the economic recovery is that there are behavioural, demographic and economic forces at play. These are:

1. The market is anticipating further cooling measures, thereby causing people to bring forward their purchases.

2. Working from home is creating an isolationist environment, which together with Zoom and other live online broadcasting channels is encouraging compulsive buying.

3. Demographics are increasingly playing a part in fuelling demand with baby boomers downgrading and freeing up equity for their children to buy private properties. The weight of money from these downgraders is also likely to lift prices of lower order housing, thereby narrowing the gap between various housing types.

4. Delays in new public flat completions are causing applicants to look to resale public flats, thereby driving up prices and narrowing the price gap between these flats and private ones. This makes it easier for existing public flat owners to upgrade.

5. Singapore’s continuing efforts to attract new economy companies, those which come with astronomical valuations and payoffs to both founders and employees, is expected to raise the purchasing power of the entrepreneurial class and skilled labour pool. Their ability to pay then far exceeds the value of properties here.