Recently, there has been a great deal of interest in the run up in property prices. The following are some statistics from the Yearbook of Statistics 2009 which can help explain why.
Number of HDB flats | Total Population | Resident Population | |||||
2003 | 874,183 | 4114.8 | 3366.9 | ||||
2004 | 876,985 | 0.3% | 4166.7 | 1.3% | 3413.3 | 1.4% | |
2005 | 877,546 | 0.1% | 4265.8 | 2.4% | 3467.8 | 1.6% | |
2006 | 878,820 | 0.1% | 4401.4 | 3.2% | 3525.9 | 1.7% | |
2007 | 883,448 | 0.5% | 4588.6 | 4.3% | 3583.1 | 1.6% | |
2008 | 884,920 | 0.2% | 4839.4 | 5.5% | 3642.7 | 1.7% | |
From 2003 to 2008, the total population increased by 17.6% The resident population increased by 8.2%.
The number of HDB flats however only increased by 1.2%.
It is unclear why HDB has been building so few HDB flats from 2003 to 2008. The numbers very clearly suggest that the HDB building program has been unable to keep pace with the increase in population. The current boom in housing prices is therefore not fueled by "irrational speculation" or HDB pricing polices. Rather it is due to a very real supply shortage in housing to meet the demands of our growing population.
The danger in these type of situations is that the large price increases will bring about a very sharp market correction. In response to criticism, the HDB has recently announced that they will step up building.
Large number of private developers have also launched new projects to "cash in" on the record prices.
On the demand side, MOM has also recently implemented policies so that it is more difficult for foreigners to come and work in Singapore.
The market will therefore almost certainly overshoot and we can be assured of a very dramatic fall in housing prices, most probably in 3Q2010 to 4Q2010.
Aurvandil
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