Singapore: House Prices Rise Rapidly as Demand remains Strong

Singapore's housing market continued its upward trajectory, with property values increasing by 3.2% in the first quarter of 2023 - the fastest rate in 12 consecutive quarters, according to a quick estimate released by the Urban Redevelopment Authority. The sustained growth in the city-state's housing market, even as property markets in other countries like New Zealand and Denmark face a slump, can be attributed to strong demand for housing and a limited supply of homes.

The housing market's stability is further evidenced by rising home sales, which hit a five-month high in February 2022, due to a loosening of supply constraints and buyers' eagerness to enter the market despite high inflation and interest rates. Singapore's real estate market has also outperformed New York City in 2022 for housing rent growth, with rents for private apartments rising by 36% YoY, according to a report by real estate portal SRX.

Singapore's favorable regulatory and tax environment for property buyers has further bolstered its housing market. For example, in its annual budget released in February, Singapore raised taxes on higher-value property buyers, which further emphasized government confidence in the local property market's long-term prospects.

Despite the COVID-19 pandemic's effects on construction activity, high demand from people seeking larger living spaces and an influx of wealthy immigrants have kept house prices climbing in Singapore. According to real estate company Savills, rents in Singapore increased more than in any other city in the world during the first half of 2022. The trend has also extended to Singapore's public housing market, where some government-subsidized apartments now cost more than S$1 million ($717,000).

The demand for high-end real estate in Singapore shows no signs of slowing down, with apartment resale prices increasing for 25 consecutive months as of August 2022. While the housing market's continued growth signals a favorable environment for property investment in Singapore, policymakers need to balance supply-demand dynamics to prevent asset price bubbles from forming and ensure that housing remains affordable for most people.