According to Singapore market observers, prices of private residential properties can increase to an average of 5 to 10 percent during the second half of the year.

In the recent months, strong sales have driven up the prices in spite of the economic downturn. Various concerns have been raised over a possible bubble in the property market.

To date, new private homes have already sold almost 6,000 units, surpassing the closed deals of more than 4,200 for the whole of 2008.

Market’s recovery is partly attributed to the recent stock market rally, price corrections and signs of economic turnaround, said the market watchers.

They also added that sales for the last four months have been driven by pent-up demand, and they anticipate this trend to continue until the end of 2009.

However, several analysts commented that if this demand fails to be supported by sound fundamentals, then this can be a cause of concern.

“A lot of this is highly dependent on prices remaining affordable because people are coming in on price weakness, and in the absence of sustained economic expansion, that could generate growth in employment as well as personal income. Then we could be looking at an imminent formation of a property bubble,” said Colliers International Research and Advisory Director Tay Huey Ying.

“It’s fairly safe to say that that mass market has actually bottomed out because if you look at transactions in the last two months, prices have increased by 10 to 15 per cent, compared to first quarter,” said CB Richard Ellis Residential Executive Director Joseph Tan.

“We have seen the return of high and mid-tier markets in terms of transactions. We’ve seen fairly good demand for properties priced between S$1,500 per square foot up to S$2,000 per square foot.”

Analysts stated that a number of upgraders will dwindle to private apartments from public housing flats, with increasing interest in much expensive properties. These buyers accounted for around 50 percent of the total sales of homes in January, but just about 30 percent in May.

In general, market watchers noted that the bulk of home buyers still comes from Singapore.