Morgan Stanley sees doubling of Singapore property prices by 2030

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Banking giant Morgan Stanley has issued a very interesting research note on the Singapore property market suggesting that house prices will double by 2030. Singapore can be a difficult property market to read but there is a general consensus that the recent downtrend may be coming to an end. Figures for the last quarter showed a 14th consecutive quarterly decline in property prices but this time round it was more skewed towards small land property. So, why is Morgan Stanley so confident about the Singapore property market?

History shows it can be done

Albeit from a relatively low level, Singapore property prices increased by 60% between 2009 and 2013 which shows that if market conditions are right there is demand. This level of performance was obviously impacted by historically low interest rates and quantitative easing around the world but it was still impressive. While the Singapore government introduced an array of curbs in 2011 to try and cool down the Singapore property market, it took two years for these to hit home.

So while a 60% increase in for example UK property prices over a five-year period would be relatively unheard of it has happened in Singapore before. So, can we really expect a doubling of prices by 2030?

Not so far-fetched

Amid suggestions that Singapore economic growth could average around 3% between 2016 and 2030 an increase in property prices of between 5% and 6% is not out of the question. Recent economic data from Singapore showed a slight reduction in year on year quarterly growth down to 2.5% against 2.9% in the final three months of 2016. One of the unique elements of the Singapore property market is that 91% of households in Singapore own their property. Indeed it is believed that around 45% of gross household assets revolve around property. There is also a strong entrepreneurial spirit in Singapore with many people eager to add more property to their investment portfolios.

On the downside some experts believe that we will see a slowdown in Singapore’s population growth, there is a problem with an ageing population and the economy may not be as strong as many predict. Morgan Stanley disagrees with many of these arguments also suggesting that single occupancy properties are likely to increase dramatically with one in five property set to be single accommodation by 2030 as opposed to one in eight in 2010.

Supply and demand

In what does seem to be a strengthening argument from Morgan Stanley we will likely see a significant reduction in property supply numbers from 2017 going forward. Between 2014 and 2016 around 20,000 residential units hit the market each year which is more than twice the historic level going back as far as 1990. Experts believe we could see a reduction of up to 40% in the current year and if supply does revert to traditional levels this will only place more upward pressure on property prices.

There are few places in the world where household ownership numbers can match that seen in Singapore. In many ways this is what makes the Singapore property market extremely sensitive to economic performance as well as the fact that “everybody is in this together”. A doubling of property prices by 2030 may seem optimistic, requiring an annual average increase of between 5% and 6%, but it is certainly not impossible.

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