By Mr. Propwise

I recently received the following email from a reader of

Dear Mr. Propwise,

Thank you for your weekly report. You’ve done a very sound analysis in putting housing growth and property growth together in your article 6.9m Population by 2030 – Good or Bad for Property?

If most people agree with your report, property price in Singapore is likely to soften within the next two years. And I think it will.

The Straits Times recently reported that the top 10% of earners have an average monthly income of $11,552 per family member for year 2012. The annualized change, adjusted for inflation, was 5.5% per annum (from 2002 – 2007), 2.7% per annum (from 2007-2011) and 5.6% from 2011 to 2012. This works out to be 4% per annum increase over the last ten years for these top income earners. This means the salary has increased by 41.7% over the last ten years from 2003 to 2012.

If we look at property price increases, the URA Private Residential Property Price Index in 2002Q1 was about 115 points and in 2012Q4 was 211.9 points. Translated to annual growth, it is 7% per annum over the last ten years… a whopping 84% increase.

So, over the last ten years, salary increased close to 42% while private property rose 84%. The growth of salary has lagged property price by two times.

I have the following questions and comments:

1. Going forward, does this mean property market prices are going to stabilize or decline?

2. Is the property price upside potential becoming less than the downside risk?

3. It probably needs a trigger mechanism to cause property price to decline substantially. Will it be interest rate rise? If so, it probably has to be a steep rise to 2.5% or more within a year.So far, there has been no major economic recession or crisis since end 2008, but I wouldn’t rule it out within the next three years….

4. On the positive side, I understand Singapore still has a lot of cash deposits thatcould help support the property price growth.I do not have the number at hand, but it will be good to find out if it is still increasing.

Thank you very much for your weekly advice. Your reports are definitely worth reading and studying.

Best Regards

R. Tan

Hi R.,

Thanks for your well-researched comments. I went back to take a look at the original report from the Department of Statistics Singapore, and the number that I thought was relevant was the Total Household Income from Work, which grew by 41.1% from 2007 to 2012, or 7.1% annualized.

Over this time period, the URA Property Price Index grew by a cumulative 62.7% or 10.2% annualized. So I think we can say that over this time period property price growth exceeded that of Total Household Income from Work, which means that affordability has deteriorated.

But do note that this only measures income from work (i.e. employment and business earnings). As the home ownership rate in Singapore was 90.1% in 2012 (according to Singstat), that means that the net worth of 90% of the households here was growing at a much quicker rate (it’ll be that 10.2% magnified by the impact of leverage).

I believe that the combined impact of growing income and wealth was very supportive of the property market over this period (even taking into account the glitch during the Global Financial Crisis).

1. Looking at these growth rates doesn’t give us too much insight into the future of the market. While nobody can forecast the future with any accuracy, I believe taking stock of where we currently are in the cycle and looking at factors that’ll affect future demand and supply is the best way to guide our property decisions.

2. Based on the Property Market Cycle Model that I developed for, as of 2012Q4 we are in the Late Bull stage of the market, which certainly suggests that the risk-reward for buying property is not great, i.e. the downside is greater than the upside.

3. As I’ve written before, for Singapore property prices to fall, I believe we’ll need to see some sort of external shock (what I call a “black swan”, using NassimTaleb’s terminology) that will lead to an increase in interest rates and/or unemployment rates. The cause could be anything from rising inflation rates, to a recession, to an epidemic. Only then will see forced sellers and “blood on the street”.

4. I went to the MAS website to download some information on deposits in Singapore. They are still growing as of 2012, but at a slower pace. Certainly there’s still a lot of cash sitting in the bank waiting to be “deployed” into some opportunities, so this could cushion any fall in the property market.

Thanks for the great questions – hope the above has been helpful!

To Wisdom and Beyond,

Mr. Propwise

By Mr. Propwise, founder of, a Chartered Financial Analyst and resident real estate analyst at, a site to help property owners and investors make profitable decisions in uncertain times.Click here to learn more

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