Ishwinder Kaur and her husband spent more than two years buying their first Singapore home in hopes that property prices would fall while the hunt.
The couple finally bought their apartment in December after prices rose by a quarter last year, despite the city-state’s worst recession during the Covid-19 pandemic.
“We were very worried because we saw people snap up houses on the left, right and in the middle,” said Kaur.
Real estate prices rose again in the first quarter. The private real estate market grew by 3.3 percent. This is the largest increase in almost three years. This raises expectations that the government is likely to step in soon to calm the market down.
With interest rates low, confidence in the long-term security of real estate and fear of missing out, the boom is increasingly coming into conflict with the government, which has warned buyers should exercise caution.
Authorities in Singapore, where real estate is a safe haven for wealthy foreigners, closely monitor house prices to ensure housing remains affordable for locals and keeps pace with economic fundamentals.
They started with caution late last year, and Prime Minister Tharman Shanmugaratnam again warned in April that home buyers should exercise caution given the risk of rising interest rates. Instead, some buyers try to stay one step ahead of an intervention and keep growing sales.
“Given that only property value seems to be growing steadily and there may be additional stamp taxes coming soon to cool the market down, it is better to invest in a new home at this point,” said Faye Zhou, sales engineer, who is looking for one Condominium.
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Government instruments to cool the market include increasing stamp taxes for foreign buyers and investors with multiple homes or increasing the proportion of down payments. It can also increase the supply of land through tenders.
Household prices fell 11.6 percent over 15 quarters from their 2013 peak after the government took steps to stem the housing boom as Singapore emerged from the global financial crisis.
The government last tightened restrictions in 2018 after prices rose 9 percent over the course of a year, and analysts expect them to act again as the city-state’s economic recovery from the pandemic is uneven and short-term wage growth subdued remains.
Foreign demand is also returning, according to real estate consultant OrangeTee, helping to boost luxury property sales to their highest level since the third quarter of 2017.
The total number of transactions in the first quarter almost doubled year-on-year and reached its highest level in at least two years.
The booking of home loans with the DBS Group, Singapore’s largest bank, was at a record level.
“Part of this is because of people’s belief that you may see some cooling measures. So people are trying to stay ahead of that,” CEO Piyush Gupta told reporters on the bank’s earnings call.
LAGERSQUEEZE
In addition, supply on both the private and public housing markets is tightening due to delays in construction caused by the pandemic.
The inventory of incomplete houses with property developers is declining and was 40 percent lower in the first quarter compared to the previous year.
Developers will likely seek to purchase land to replenish their inventory, either government land or existing blocks of flats that can be redeveloped. Analysts expect intense competition for land, which in turn can lead to further price increases.
Real estate in scarce Singapore has long drawn the super-rich from across Asia, and political uncertainty in rival Hong Kong has helped add to that appeal.
And even if prices drop from recent highs in the short term, buyers are confident they won’t stay low forever.
“Singapore property prices are sure to keep rising in the long run … there is limited land but more people are coming to Singapore,” said Sky Chen, a 30-year-old architect who bought his apartment in November.
