A recent UBS report has reclassified Singapore’s private residential property market as “fairly valued” after a period of slowed price dynamics.
Real estate prices surged by 15% since 2018, despite regulatory tightening, while rents spiked by approximately 40% over the same period.
However, cooling measures and stricter lending policies have led to a modest 3% increase in home prices in inflation-adjusted terms between mid-2022 and mid-2023.
UBS anticipates both home price growth moderation and rent softening as housing supply increases and demand stabilises.
Regulatory risks are a key concern, as rental market regulations remain a possibility.
Affordability, as measured by the price-to-income ratio, is stretched in numerous cities despite recent house price declines.
Unaffordable housing is often attributed to factors such as strong foreign investment, zoning restrictions, or strict rental market regulations.
Weak investment demand poses risks of price corrections and long-term price appreciation challenges.
In Singapore, it takes an average service worker ten years of income to afford a 650 sq ft flat near the city centre, making it more affordable than in Hong Kong, where it would take 22 times the average annual income.
Among other cities, Miami, Madrid, and Toronto exhibit more sustainable price-to-income ratios.
Singapore ranks sixth for affordability among 25 cities surveyed by UBS.
Price-to-rent multiples have declined compared to the previous year, with a Singapore apartment taking around 23 years of rent to pay for itself, in contrast to 15 years in Miami and 42 years in Tel Aviv.
UBS found that real housing prices across 25 major cities had dropped by 5% in inflation-adjusted terms on average.
Rising financing costs due to tripled average mortgage rates since 2021 have hindered housing price growth.
The report highlights that annual nominal price growth stagnated after a 10% rise in the cities analysed, with many cities now approaching mid-2020 price levels.
Only Zurich and Tokyo remain in the bubble risk category this year, with several cities previously in this category, including Toronto, Frankfurt, Munich, Hong Kong, Vancouver, Amsterdam, and Tel Aviv, now classified as overvalued.
This group also includes housing markets such as Miami, Geneva, Los Angeles, London, Stockholm, Paris, and Sydney.
Apart from Singapore, other property markets deemed “fairly valued” by UBS include New York, Boston, San Francisco, Madrid, Milan, Sao Paulo, Warsaw, and Dubai.
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