Singapore’s property market to benefit from population & economic growth ahead

Singapore’s property market is expected to benefit from a number of government policy changes that have recently begun to take effect, according to recent research data published by JLL.

In an April 2017 report entitled Back to life, back to growth, the financial and professional services firm says it believes the city state’s population and skilled workforce growth rates are set to rise over the next few years to benefit office, retail and residential demand in the local property segment.

Singapore’s Minister for Manpower Lim Swee Say in Feb 2017 revealed plans to create around 25,000 to 40,000 jobs annually for the next few years. While the firm reckons this means population growth could rise to 1.5-1.8% per year in 2017-2025, the firm also estimates that the number of employment pass holders could also increase by 10,000 to 16,000 per year as compared to just 1,000 per year in 2012-2014.

At the same time, JLL expects gradual relaxation of residential cooling measures, as well as the lift in government housing grants from March 2017, to boost home prices in the years to come.

Regina Lim, head of Southeast Asia capital markets research, JLL, calls the government’s recent move to increase housing grants for resale public housing (HDB) flats by $10,000 to $20,000 an “upside surprise” – as it is the first time an increase was done in the last ten years for housing grants targeting the middle-income groups.

“The higher housing grants could translate to higher HDB resale sales proceeds, which would allow the sellers to buy bigger or more expensive private condominiums as they upgrade. As we expect most upgraders to borrow up to 80% loan-to-value for their mass market condominiums, this could translate to spending $50,000-$100,000 more on their purchase,” says Lim.

She deduces this translates to a 5-10% increase in mass condominium sales assuming, that the average condominium is priced around $1-1.2 million.

Additionally, as part of the 2017 Budget, Singapore’s government has also relaxed some of its residential market cooling measures, which JLL sees as a signalling move that will minimise market disruption as the US fed funds are increased gradually and interest rates rise over the next three years.

“Singapore’s inflation is expected to hit 1% in 2017, after two years of deflation. Historically, office demand correlates with GDP growth, and this will likely spur the growth of retail sales and rental values. Singapore’s economy is expected to grow by 2.6% in 2017 and 3.2% in 2018. Putting these factors together, we can expect to see office demand and retail sales to improve after slowing for the last six years,” she adds.

This article first appeared in The Edge Singapore Market Report.

The Edge Markets helps its readers to make better business and investment decisions by empowering them with the latest financial news, data and analytics. The Edge Markets is part of The Edge Media Group.

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