Divergence in home prices due to “euphoric sentiments” in private property market

The government will continue to monitor the property market to ensure it is stable and sustainable.

The URA Property Price Index (PPI) and HDB Resale Price Index (RPI) would tend to move together, but they moved in opposite directions last year due to upbeat market sentiment in the private residential market, according to National Development Minister Lawrence Wong in a written parliamentary reply on Monday (11 Feb).

According to data released by the URA on 25 January, private home prices increased by 7.9 percent in 2018 following a 1.1 percent gain in 2017. On the other hand, statistics from the Housing Board showed that HDB resale prices slid by 0.9 percent, an improvement from the 1.5 percent drop in the year before.

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“The recent divergence was largely due to euphoric sentiments in the private property market. This resulted in a sharp increase in private property prices over a very short duration.

“This was not sustainable as prices were increasing well ahead of fundamentals. Hence the government had moved to introduce the last round of cooling measures in July last year.”

Wong also said that the authorities will continue to monitor the private housing market and HDB resale market, and ensure both are stable and sustainable.

He said this in response to a query from Non-constituency Member of Parliament Daniel Goh Pei Siong, who asked whether the unusual divergence in price trends for private homes and HDB resale flats in 2018 was caused by concerns regarding leasehold decay and depreciation of ageing HDB flats, and whether the divergence is a cause for concern if it’s not arrested.

Get more details on the property market outlook for 2019 here


Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg

This post was originally posted on Property Guru Property Market News Section