By Mr. Propwise

From the URA’s recent 3Q2013 Private Residential Property Price Index (PPI) release, property prices have continued to defy gravity, although the pace of increase has slowed – the 3Q2013 Residential PPI was up 0.4% on a quarter-on-quarter basis, versus the 1.0% increase of the previous quarter.

Singapore property prices at an all-time high…

Based on analysis of the URA numbers done by the Singapore property research site, at the current levels the price index is 21.9% above the previous 2Q2008 peak, and 19.2% above the previous all time high in 2Q1996.

Figure 1 – URA Property Price Index

On the surface, it would appear that the strength of property demand, supported by low interest rates, has outweighed concern over the weak economic situation in Europe and China, and the prospect of rising interest rates US (and hence globally) when the Fed tapers, although it appears the Fed has also “tapered its tapering”. And not to mention the dampening effect of multiple rounds of government measures since 2009, including the onerous Total Debt Servicing Framework (TDSR) released by the Monetary Authority of Singapore (MAS) in June.

…but is mainly supported by strength in the Outside Central Region…

The rate of price growth differed widely across the various market segments. In the Core Central Region (CCR), prices of non-landed private residential properties actually fell by 0.3% (the second consecutive quarter of decline) versus a remarkable increase of 2.2% in the Outside Central Region (OCR), on top of a frothy 3.8% increase in the previous quarter. Even prices in the Rest of Central Region (RCR) fell by 0.9%.

The PPI in the OCR continues to surpass that of the CCR.

Figure 2 – URA Property Price Index for the Different Regions (Source:

Don’t blame the foreigners

Who are continuing to buy these overpriced properties in the fringes of Singapore? While there’s been a lot of anti-foreigner sentiment in Singapore in recent years, at least for this surge of prices in the OCR, it appears that it is the regular middle income Singaporeans who are the bulk of the buyers. Since 2009 Singaporeans have been growing as a proportion of total buyers, and made up 77.4% of buyers in 3Q2013.

Figure 3 – Singaporeans as a percentage of total purchasers (Source:

The pullback in non-Singaporean buying has also been affected by the much harsher Additional Buyer Stamp Duties imposed on Permanent Residents and Foreigners in January 2013 in the Seventh Round of government cooling measures.

Will property prices correct?

Figure 4 – Change in URA Property Price Index

Since late 2011 property prices have been in a sort of limbo, not rising by much but stubbornly refusing to correct either. The question hanging on most people’s minds is: when will property prices correct? Prices have been defying gravity despite the threat of a weak global economic environment, propped up by close-to-zero interest rates in the United States and Singapore.

Figure 5 – 3-Month and 12-Month SIBOR

Developer inventory building up

While the main theme in Singapore property over the last two years has been the strength of developer sales while the resale market has languished, we could be finally seeing a weakening of demand for overpriced new launches.

Figure 6 – Monthly Developer Sell-Through Rate (Source:

While the Monthly Developer Sell-Through Rate is fairly volatile, in September 2013 it fell to 69% from 80% the month before, suggesting that developers are seeing slower turnover of their inventory.

Figure 7 – Developer Inventory Levels (Source:

And indeed, developer inventory levels have been increasing, approaching the highs last seen in mid-2012. In September 2013, inventory levels stood at 6,546 units, a 10.5% increase from the month before.

So are we there yet?

I’ve said this before, and at the danger of repeating myself too many times I believe that we will only see significant levels of price declines if: 1. There is an external crisis that causes a panic, which we had in each of the previous three declines (e.g. Asian Crisis, Dotcom Bubble + SARS, Global Financial Crisis); or 2. If interest rates rise significantly thanks to the Fed’s tapering, which will happen when the US economy strengthens and unemployment rates fall, potentially in late 2014 or early 2015.

In the meantime the abundant global liquidity situation and sustained low interest rates will continue to support Singapore property prices, although the large upcoming supply of property and building up of developer inventory will pressure prices, and could even result in a price correction. Based on the Property Market Cycle Model of, we are in the Late Bull Stage of the market. This means that the upside potential risk is limited while the downside risk is significant.

Property prices cannot continue to defy gravity forever. We’re just not there yet.

By Mr. Propwise, founder of top Singapore property blog and, an essential property market analysis site that helps buyers and sellers make profitable investment decisions. Visit his sites to download free property reports.

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