Residential property prices in Singapore are over-inflated and ripe for a correction, possibly sometime this year, according to real estate professionals from the city state.
Historical data from Credo Real Estate shows that Singapore has experienced several instances of residential property price corrections in the past, most notably in 1983, 2000 and 2008, following a sustained period of virtually zero price moderation – a pattern that has become apparent with Singapore’s property market today.
Singapore’s residential property price index slowed to a meager 0.2% during the final quarter of 2011, down from a low 1.3% in the third quarter of 2011. Credo Real Estate believe that this indicates that current property values in Singapore are close to their apex, and that a correction could happen any time soon.
Adding further weight to that argument is the fact that previous property price corrections in the country tend to coincide with deteriorating economic conditions or periods of low GDP growth, something that is also happening now.
Ong Teck Hui, head of research at Credo Real Estate, told The Business Times that should the country experience a recession this year, it will almost certainly be followed by a correction of residential real estate prices in Singapore.
“Even if we don’t see a recession this year but economic conditions continue to deteriorate, a market correction is extremely likely,” said Hui.
Market analysts in Singapore have been arguing for some time over when a correction is likely to take place, with many believing that one would occur in 2012 as a result of government cooling measures, economic uncertainty and rising inventories.
However, Singapore could yet escape a significant correction, if the economy performs better than expected this year, says Mr. Hui.
“If that happens, we’re likely to experience a more stable market, although market performance among different segments will be uneven, and price adjustments will take place inside a narrow range,” he added.
Mr. Hui predicted that Singapore’s suburban primary mass market may stay in a pretty healthy shape should a recession be avoided this year, due to a large demand for housing, although secondary markets will probably face price moderations.