Household income growth (4%) outpaced the 1.2% rise in property prices.
Singapore's price-to-income ratio, a "good' parameter to judge the current affordability of homes, has improved has shown positive development since 2010, RHB Research said in a report.
This particularly reflects the continued improvement of household income, which has grown by a CAGR of 4% over the last 10 years. By comparison, the median property price has grown by a CAGR of 1.2% over the same time period.
Given improved affordability, the brokerage thinks there is room for price increase. "As demand recovers, there is scope for developers to raise prices before they become unaffordable. Even by international standards, Singapore’s price-to-income ratio is more favourable to the likes of big cities such as London, Tokyo and Hong Kong," it said.
Behind the demand recovery is the improving job market and low-interest rate environment. "With the labour market tightening, wage pressures have started to build up. Meanwhile, Singapore's housing loan rate (calculated by the average of 10 finance companies) is among the lowest on record," RHB Research added.
This is despite various pre-emptive measures to reduce demand and speculative behaviour. The Total Debt Servicing Ratio (TDSR), Seller’s Stamp Duty, and Additional Buyer’s Stamp Duty are still in place.
"These measures have been successful in curbing the influx of overseas money. Yet demand from Singaporean buyers remains the primary driver of the private residential market's recovery. The proportion of domestic purchases increased to 75% in 2017 from 64% in 2011," RHB Research said.
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