Why It Matters

Reading into home price data

There is good news and bad news in the range of recent data that points to steadily rising prices in the private home sector.

Those price rises will cheer owners who have had a lean few years of stagnating values, but they also raise some less-welcome prospects.

One is that more people will be priced out of the condo market, while surging prices could prompt more cooling measures.

National Development Minister Lawrence Wong told an industry event last November: "We recognise that there will always be ups and downs in the market... As far as possible, we will make use of the various levers we have to achieve a more stable and sustainable property market."

There are plenty of signs that private home values are heading north.

Some analysts expect double-digit growth in private home prices this year, following data showing a strong uptick in the first quarter. Prices gained 3.9 per cent in the three months to March 31 from the previous quarter, the steepest such gain since 2010.

This shows that the market has not only recovered from its recent slump but also strengthened.

The increase in the first quarter also shows that the recent spate of collective sales has helped boost demand, as some buyers seek replacement homes.

But the price rises may also stoke fears that the "condo" in the long-prized 5Cs here may be getting increasingly out of reach.

As Mr Nicholas Mak, executive director of ZACD Group, put it, the market is likely to see continued rising land prices in collective sales and Government Land Sales residential tenders for the rest of the year.

Developers may face cost pressure to raise prices of future projects, he added, predicting that the price index could rise by 10 per cent to 17 per cent this year.

The gap between private and public home values also widened in the first quarter, with HDB resale prices dipping for the sixth consecutive quarter.

While higher prices could mean a windfall for owners cashing out, a prolonged rally could spell problems for home buyers.

A version of this article appeared in the print edition of The Straits Times on May 03, 2018, with the headline 'Reading into home price data'. Print Edition | Subscribe