The optimistic outlook for the property market is partly due to the slew of en bloc deals since May 2017.
Morgan Stanley has released the most bullish forecast for the Singapore housing market, expecting private home prices to increase by two percent this year, before rising again by another eight percent next year, reported the Business Times.
This compares with DBS’s forecast of a two percent fall in 2017 and three percent increase in 2018 and another three percent in 2019. OCBC Investment Research, on the other hand, only expects a bottoming out of prices in 2018, with prices falling five percent this year.
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In April, Morgan Stanley analyst Wilson Ng even predicted property prices to double by 2030. Maintaining his earlier forecast, Ng has provided a timeline of the inflexion point, stating that property prices will rise in Q3 2017 instead of early-2018 as he had previously expected.
His optimistic outlook for the market is partly precipitated by a slew of en bloc deals that began entering the market in May 2017. With seven en bloc sale projects already awarded, about 1,500 homeowners are expected to be displaced, each of whom is about $1.8 million wealthier.
“With leverage, this adds up to $13 billion of potential capital inflows that could find their way back into the property market, more than the entire value of developer sales in 2016. More en bloc deals could follow, with 50-60 more currently under discussion,” he said.
Other signs of an imminent price recovery are the significant increase in transaction volumes and the milder decrease in private home prices as shown by the Urban Redevelopment Authority’s (URA) second quarter statistics. URA data showed that private home prices dipped by 0.1 percent in Q2 2017 compared to the 0.3 percent fall stated in its flash estimate.
“We think that prices could have risen in late June…The flash estimates do not factor in the last two weeks of June. When URA revised up the number, it implies that in the last two weeks of June, prices have already started rising,” said Ng.
Moreover, unsold inventory also plunged to a record 22-year low of 17,000 units in June. And going by the present selling rate, Ng expects them to be cleared in 16 months.
This comes as households that remained on the sidelines during the 2014 to 2016 property lull are now entering the market.
Ng, however, is unable to tell if prices would double sooner than the 2030 timeline since the new supply from en bloc redevelopments may lead to further shifts in the market.
“It is a time period of about 13 years, so it could be more than one cycle. Could be up-cycle, down-cycle, up-cycle…Micro-markets historically have moved in cycles, so I wouldn’t be surprised if it’s a cyclical move to 2030.”