By Mr. Propwise

From the URA’s flash estimate of the 3Q2011 private residential property index released last week, property prices in Singapore have (again) hit an all time high. Prices were up 1.3% in 3Q2011 on a quarter-on-quarter basis and 8.5% on a year-on-year basis.

At the current levels the price index is 15.9% above the previous 2Q2008 peak, and 13.4% above the previous all time high in 2Q1996. Of course, as long as the price index keeps rising, it’ll keep making an all time high.

What is interesting to note is that the rate of growth has been slowing for 8 quarters, i.e. property price growth has been decelerating. This is likely due to concern over the slowing economy, worrying global economic situation especially with the troubles in Europe and weak growth in the US, combined with the dampening effect of the government measures.

The positive growth of property prices should be placed in stark contrast with the stock market which has been struggling since August.

This could suggest that the upward force from the abundant liquidity situation is still stronger than the downward pressure from the government measures and shaky external situation. But if you believe that the stock market is a leading indicator for the property market, then we could see property price growth turn negative in the coming quarters.

Another interesting thing to note is that we saw this decelerating price growth trend preceding the property bear markets that began in 3Q2000 and 3Q2008 (but not the one in 3Q1996). So regardless of whether you are more a “technical” or “fundamental” investor (or both), it pays to be cautious in this market.

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