List Sotheby’s International Realty took a look at what had happened in the property market in the past decade.
Land scarce Singapore has always seen property as a valuable asset class for preserving and building wealth. Singapore’s stable political climate and global transformation has also drawn foreigners looking to invest in the country.
Through the years, the property cycle has seen its fair share of ups and downs due to economic performance and the supply and demand of housing.
Around 75% of the private housing stock is made up of non-landed homes and the rest are landed homes. Geographically, the Central Region has the highest concentration of private homes, and thus it is where the bulk of transactions take place. There was a big jump in the volume of new sales in the West and Northeast regions in 2018 compared to 2008 due to an increase in new projects in these locations.
In terms of home prices, the property market slowed down in 2008 due to the subprime mortgage crisis and the ensuing global financial crisis.
However, the downturn was brief and lasted for only four quarters. The loss of faith in financial instruments coupled with high liquidity and low borrowing costs led locals and foreigners to turn to properties as a safer investment product. As strong demand continued to drive prices upwards, the government decided to step in to prevent the market from overheating. The Singapore authorities introduced the first round of cooling measures to control soaring property prices after 2008 and continued to do so until 2013.
Only then did the measures achieved the desired impact of reducing demand and prices which lasted nearly four years. As well, private residential rents went into decline in recent years as the potential pool of tenants shrunk due to the continued tightening of foreign hires. The rental market remains weak as more new properties were added to the housing stock.
Following the price correction in the period 2014-17, the property market showed significant recovery in early 2018 until new cooling measures were imposed in July, in anticipation of an avalanche of new launches that might cause prices to spiral further. As it was, prices in 2018 reached levels higher than those in 2008 due to factors such as healthy economic fundamentals and strong liquidity combined with low borrowing costs evident by the lower housing loan rate of 3.2% in 2018 vis-à-vis 5.6% back in 2008.