Singapore: Price History

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Singapore's boom and then pause

Singapore’s property market took off last year. The residential property price index rose by 31.2% in 2007, after 2006’s 10.2% rise. However, prices in prime districts rose by considerably more. Capital values for non-landed freehold homes in the prime districts increased by 55% in 2007, according to figures from DTZ Debenham Tie Leung.

Yet now there is a pause. Though private residential prices rose by 3.7% in Q1 2008, transaction volumes have fallen sharply, and nervousness is indicated by the fact that in the quarter rents have risen more than buying prices (6.0%). The global credit crunch has pushed the Singapore market into holding pattern, and both buyers and sellers are cautious.

According to an analysis of private residential transactions by DTZ, foreigners bought 6,536 non-landed homes from the secondary market in 2007, which could account for more than 50% of secondary market transactions – a record.

Singapore is experiencing an influx of expatriates, and some foreigners prefer to buy rather than face escalating rentals, especially if they are going to be in Singapore for more than a couple of years. Rents of prime apartments and condominiums increased 45% year-on-year in 2007, according to DTZ figures.

Indonesians and Malaysians are the biggest foreign buyers, accounting for 23% and 17% of all foreign buyers in 2007 respectively, but Indians (12%), Britons (8%), Chinese (7%) and Koreans (7%) are also well represented.

There is also a tight supply of prime apartments, as a number of prime developments have been demolished, or are slated for redevelopment.

The Singaporeans, as ever, are taking nothing for granted. In April Tony Tan, Singapore Government Investment Corporation (SGIC) chairman, warned that the world could be facing a long and deep recession.

Aside from strong economic growth (7.7% GDP growth in 2007, following 7.9% GDP growth in 2006, 6.4% in 2005 and 8.7% in 2004), the housing market has been boosted by policies implemented in 2005:

• The relaxation on foreign ownership of apartments
• An increase of the maximum loan-to-value ratio from 80% to 90%
• A reduction of cash down payments from 10% to 5% for home purchase
• Allowing non-related singles to use their Central Provident Fund (CPF, a social security pension scheme) to jointly purchase residential properties.

Singapore has ambitious growth plans and is not standing still as a centre. As part of its strategy, the Urban Redevelopment Authority (URA) intends to double the size of the existing CBD area.

Mortgage interest rates have been flat over the past two years, at 5.73%. Loans in Singapore are typically on a variable rate at just above the prime lending rate, now 5.33%.

Housing policy

A major goal of Singapore’s government is to promote home-ownership. The government, through the Housing and Development Board (HDB), Urban Redevelopment Board (URB), Monetary Authority of Singapore (MAS) and the CPF, was able to increase home ownership from 27% in 1970 to its present level of around 92%.

Singapore had a serious housing crisis soon after independence. The HDB was created in 1960 to deal with this shortage and administer the housing sector. Between 1960 and 1965, 54,430 high-rise and high density flats were created, chosen due to land shortage. The share of Singaporeans living in HDB flats has ranged from 80% to 90% through the years.

With economic stability and increased purchasing power, the immense demand for housing in Singapore led to rapid increases in house prices in the 1980s to 1990s. From 1986 to 1996, private residential price index rose by about 440%. The government, then, stepped in and curbed property speculation.

In 1993, the housing financing policy for resale HDB flats was liberalized. Flats were allowed to be financed based on market prices and not HDB-listed prices that were substantially lower. In response, the number of flats available to the private sector jumped from 78,012 to 129,106 in 1995.

The increased supply, plus the intense campaign against speculation, combined with the effects of the Asian crisis, led to a 45% fall in prices in just two years (1996-1998). The housing market slightly recovered from 1998 to 2000, but global events plunged it back to crisis.

Small rental sector

With the most successful home-ownership program in the world, the rental sector in Singapore is very small, mostly designed for the expatriate market. The local private rental sector is much smaller, because the HDB still owns about 81% of all rental units.

Most of the expat-compatible apartments are located in buildings with amenities such as pools, tennis courts, and gym. Sized at 800 to 2,000 sq. m., there were 9,986 executive condominiums as of fourth-quarter of 2006.

Singapore - more data and information

• Singaporean house prices, rents, and letting income - real data!
• How expensive are houses in Singapore, compared to the rest of Asia?
• How much rent can be earned from Singaporean property, compared to the rest of Asia?

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