With the upcoming general election in Singapore, increasing property prices pose an economic and political risk that could erode citizens’ support of the country’s ruling party.
Private property prices climbed 17.6 percent in 2010 despite the government’s cooling measures, while resale prices of HDB flats (which house more than 80 percent of the population) rose 14 percent. In contrast, median household income rose a much smaller 3.1 percent to S$5,000 per month in 2010.
Singapore, the second-largest financial centre in Asia, behind Hong Kong, has one of the highest rates of home ownership in the world at 87 percent. This is largely due to the government’s home-building programme that has been providing affordable housing for Singaporeans since the 1960s.
However, the public housing board is now building less flats and charging more. Prices of both HDB flats and private homes have also increased, due to the influx of foreigners and permanent residents (PRs) in recent years.
“The high property prices, especially for private homes, is a festering source of disappointment, unhappiness and perhaps anger among voters,” said Eugene Tan, a lecturer at Singapore Management University (SMU).
“Parents are also concerned with how their children are going to afford comparable homes in the future. The angst and anxieties are made worse by the view that foreigners are pushing up property prices.”
Nearly 36 percent of Singapore’s current 5.1 million-strong population consists of foreigners, up from 20 percent of its 4 million-strong population a decade ago.
Aside from the increasing number of foreigners, many Singaporeans also blame higher home prices on the sharp drop in the number of HDB developments, after the agency introduced the Built-to-Order policy a few years ago.
According to HDB data, it completed an average of 3,600 flats per year from 2006 to 2008, compared with over 11,000 flats per year from 2001 to 2005.
“Our pay hasn’t doubled, but the prices of flats have more than doubled, even for new HDB flats,” said Wendy Cheng, a former teacher who began part-time work after giving birth last year.
Singapore, like China and Hong Kong, has difficulty maintaining property prices, due to the influx of foreign money and the global liquidity growth that has driven mortgage rates to near record lows.
Kelvin Tay, Chief Investment Strategist at UBS’s private bank in Singapore, said property prices are aided by low interest rates and the market could be significantly corrected if borrowing costs rise above 3.5 percent.
The Singapore government is aware that many are wary about the increasing home prices and has therefore stepped up the construction of HDB flats and raised subsidies for first-time flat buyers in the lower-income group. It also implemented tougher measures on 13 January, including stricter borrowing limits and imposing a 16 percent sellers’ stamp duty (SSD) for properties sold within 12 months of purchase.
Prices of HDB resale flats and other low-end condominiums have stabilised since these measures were implemented but luxury homes continue to be in demand, especially from wealthy mainland Chinese.
Analysts said there is spillover demand from wealthy mainland Chinese investors, who in 2010 surpassed Indonesia as the largest group of foreign buyers acquiring Singapore residential property.