High correlation between economy and home price growth
New data shows that home prices are dragged down by a sluggish GDP growth.
There is a relatively high correlation between the city-state’s home price increase and real economic growth, reported Singapore Business Review, citing a chart from OCBC Investment Research (OIR).
Source: URA, Bloomberg and OIR
The above chart shows that home prices are dragged down by a sluggish growth in gross domestic product (GDP). The research house calculated that the correlation between both figures stood at 0.74 in the past 14 years.
Given the high correlation, OIR believes that private home price growth for the whole of 2018 will hover at the lower-end of 8.0 percent to 10 percent.
Get more details on the property market outlook for 2019 here
“Moving into 2019, we are projecting price growth to range between -3.0 percent to +2.0 percent as slower economic growth and the deluge of new launches may act as a dampener on home prices,” said the research house.
In terms of transaction volume, OIR expects private home sales to reach 8,000 to 10,000 units this year, then rise to about 10,000 to 12,000 units by 2019. This is on the back of Bloomberg’s consensus projection that Singapore’s GDP will expand by 3.3 percent in 2018, then moderate to 2.7 percent next year.
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Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
