Collective sale fever may be going strong, property prices are rising again and sales volumes are picking up, but regulators have given a clear warning that these signs may be more cause for caution than celebration.
The Monetary Authority of Singapore (MAS) said in its 2017 Financial Stability Review published last Thursday that there is "excessive exuberance" in the property market as well as risks from rising land prices and a possible oversupply of housing stock.
It also urged developers, lenders and prospective home buyers to act with caution.
The mood dampener is not without good reason.
The development of collective sale plots and Government Land Sales sites could add another 20,000 new units in the next one or two years. This will more than double the current supply in the pipeline, assuming the inventory of about 17,000 units with planning approvals remains unsold.
The MAS noted that there is "considerable uncertainty" whether existing vacancies of over 30,000 homes and the new supply can be fully absorbed by the market, especially when slower population growth is factored in. If demand is insufficient, there could be pressure on prices and rentals in the medium term. The MAS warning comes soon after National Development Minister Lawrence Wong urged developers and prospective home buyers to be prudent.
Private home prices rose 0.7 per cent in the third quarter after 15 quarters of decline. Transactions in the first 10 months of this year have already exceeded those for the whole of last year. The current collective sale fervour is expected to remove some 3,400 units from the market in the near term, while adding over 11,600 units in the medium term.
The Government has stopped short of implementing more cooling measures - for now. Developers' current exuberance, fuelled by a recovering property market, is understandable, but it might just be cut short if the market gets too fired up.