Singapore property prices decoupled from global yield chase, speculators: IMF study

Singapore’s private residential prices appear to have decoupled since 2013 from the global chase for yields, a fresh study by the IMF showed.

This is as macroprudential measures undertaken by the Singapore regulators in recent years targeted foreign buyers and speculators – the pacemakers behind the asset chase on Singapore properties, said the study, which was released within the annual Financial Stability Review of the Monetary Authority of Singapore (MAS) on Thursday.

Prices in the private residential property market increased by almost 16 per cent between 2010 and 2013, the report said. Speculative activity, as indicated by the large shares of short-term resales, as well as interest from foreigners, was high during this period. Notably, purchases by foreigners peaked at about 20 per cent of all transactions in 2011.

Today, activity by foreigners and corporates has remained stable over the past year in the private residential property market, the MAS Financial Stability Review showed. The share of transactions by foreign buyers account for 5-6 per cent of total transactions over the past three quarters. For that of corporates, the share stood at 1-2 per cent.

The report showed that a boom in residential property prices could have whetted the appetite of foreigners and corporate investors for the domestic property market.

Meanwhile, short-term resales could be positively related to residential property prices as flippers were timing the market, selling their properties when prices were rising fast.

“In these cases, the growth of residential property prices would be positively correlated with transactions,” the report showed.

Foreigners’ purchases were found to have the largest impact on the growth of residential property prices, with the effects “economically significant”.

And despite making up a small fraction of the residential property market, speculators had an outsized impact on property prices as well. Property flippers – making up about 5 per cent of total resale transactions between 2004 and 2012 – can influence property prices by inducing a positive feedback to owner-occupiers and rental investors.

By targeting sources of risks including transactions of speculators, foreigners and corporates through stamp duties, the cooling measures undertaken by the Singapore regulator since 2013 have limited excessive property price increases, the report said.

For example, stamp duties worked to limit excessive property price increases in Singapore by curbing the demand of speculators, foreigners, and corporates, which were found to be significant drivers of residential property prices.

It said these moves have also contributed to improving the resilience of households and financial institutions against shocks.

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