Residential property prices set to rise up to 12% in Singapore in 2011

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Residential prices in Singapore to rise in 2011

A positive economic outlook and supply shortages are set to increase private residential property prices in Singapore by five to 12% in 2011, according to analysts.

Higher priced properties are expected to rise the most and attempts to cool the real estate market are likely to be slowed down by robust economic growth of 4 to 6%.

‘The residential market is generally looking very strong, very bright. Having said that, within the various categories, we believe that the mid-prime and prime would do slightly better than the suburban market,’ said Karamjit Singh, managing director, Credo Real Estate.

‘We see more capital upside in mid-prime, prime. It’s also that segment of the market that has not fully recovered from the all-time peak in 2007, where the suburban market has surpassed and we’re now at historical highs,’ he explained.

‘2010 can be considered as a recovery year, where we’re recovering from an economic slump, from a very low base. So the pace of rise of values tends to be faster, quicker. I don’t think it’ll be repeated in 2011, unless there’s an entirely new phenomena that re-prices the property values in general. So here we’re talking about a more moderated pace of growth, backed by an overall sense of confidence,’ he added.

Some analysts expect prices in the luxury market to easily push past S$2,500 per square foot mark. ‘I think the main reason is that Singapore continues to be a very attractive hub for a lot of wealth management centres. A lot of the investment banks are beginning to focus in bringing a lot of high net worth investors to park their money here. And as a result, I think some of these amounts will continue to trickle into real estate, and predominantly residential is usually the first stop for some of these investors,’ said Donald Han, vice chairman, Cushman & Wakefield.

‘In addition to that, I think the market has started to see rental increases over in 2010. Rents have gone up by as much as 13% year on year and there is likely to be a lack of new supply completed in 2011,’ he added. Research indicates there could be around 6,700 units completed in 2011 compared with 9,700 last year, around 30% less than is needed to meet demand.

Experts predict that there will be between 10,000 and 13,000 new private home units sold in 2011, lower that the 13,100 sold in the first 10 months of 2010.

They do not expect the government though to introduce any new property cooling measures, at least within the first half of 2011. But if there is any indication of prices becoming unsustainable, it will be considered.

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