Singapore’s property market will face higher risk of correction in the next 2 years

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Market analysts warned of the rising risk of a property market correction in the next 2 years due to global macroeconomic trends and an oversupply of homes in Singapore.

Experts noted that previous market corrections in Singapore coincided with economic recessions. For instance, the collapse of property prices in 2008 came after the sub-prime crisis in the US and a subsequent slowdown in financial activity in Singapore.

In the event that the United States Federal Reserve withdraws its monetary stimulus programme, home loan interest rates will expect to rise as capital flows out of Singapore, causing the banking system to have low levels of excess deposits. Furthermore, the openness of Singapore’s economy also means that it is vulnerable to external shocks, which could tip it into recession and raise unemployment.

Another factor to a possible market correction is the housing supply overhang. Almost 120,000 public and private homes are in the pipeline slated for completion over the next three years. Despite the plentiful supply of homes, prices are unlikely to plunge even if Singapore goes into recession. This is due to soaring land prices and strong interest from foreign developers and investors. For instance, smaller-scale developers would want to continue building up their land banks, which could in turn keep land bid prices high and translate to higher selling prices for homes.

In view of the multiple rounds of property cooling measures, experts said the current property market may be approaching a breaking point and investment demand has been clearly affected. For instance, in the public flat resale market, the median cash premium that buyers pay for a resale flat has fallen to a 4-year low last month. On the other hand, the private property sector also hit a low as sales were tepid at the launches of The Glades and The Skywoods last weekend.





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