Blame housing prices, not oil, for deflation in Singapore: Deutsche Bank

Local petrol prices have not dropped drastically.

The long-drawn commodities rout is not the sole culprit behind Singapore’s longest stretch of deflation in years, according to a report by Deutsche Bank.

Although oil prices is the obvious answer to the ongoing deflationary environment, Deutsche Bank noted that petrol pump prices have not come down even remotely commensurate with global developments.

The private road transport part of the CPI down just 1.7% yoy through November, meaning that the ongoing deflationary development must be reflecting broader factors beyond commodities, Deutsche Bank said.

“Indeed, one of the key drivers of lower CPI is completely independent of commodities; it is accommodation. The property market has been slowing for the last couple of years,” said the report. 

While the property market had previously been impacted by domestic cooling measures, it has lately been responding to global events and rising short term rates.

“Consequently, the accommodation part of the CPI is down 3%yoy. We don't think much relief is in store for the market, as the authorities are well aware that the price level of housing is still subject of much consternation among the population,” said Deutsche Bank.