Over the past five years, Singapore's property market has seen consistent growth. In 2024 alone, HDB resale prices surged by 9.6%, nearly double the increase in 2023. Private property prices also rose, climbing by 3.9%. However, with the potential for a recession, rising unemployment, and a slowing economy, the question arises: is a property market crash imminent?
Historical Trends and External Shocks
Historically, dips in Singapore's housing market have been triggered by significant external shocks or policy changes. Comparing changes in GDP with property price changes reveals a pattern. From 1975 to the present, there have been five major periods of decline in Singapore's property market. These declines have consistently occurred just before or during the early stages of an economic crisis.
The Property Crash of the 1980s
In 1981, property prices experienced a rapid increase due to the launch of the Approved Residential Properties Scheme (ARPS). This policy allowed CPF members to use their savings to purchase private properties for the first time, leading to a surge in demand and soaring prices. The government lacked the tools and experience to prevent a bubble, and without intervention, the market began to decline in 1981, leading to a correction that lasted until 1986.
By 1984, the construction market became saturated, slowing new development activity. Simultaneously, Singapore faced its first post-independence recession in 1985. This economic downturn led to business closures, rising unemployment, and a decline in consumer confidence, further dragging down the property market. Over 20 quarters, the property price index fell by a substantial 40%, marking the largest and longest correction in Singapore's property market history.
The Dip of 1996
The property dip in 1996 was triggered by several cooling measures, including:
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Capping the loan-to-value ratio at 80%.
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Banning foreigners from obtaining Singapore Dollar-denominated home loans.
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Introducing an early version of the Seller's Stamp Duty (SSD).
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Releasing more land for private housing.
The Asian Financial Crisis in 1997 exacerbated the situation, leading to currency devaluations, decreased investor confidence, and rising unemployment, thus deepening the property downturn. However, this correction was shorter and less severe compared to the 1980s, lasting 10 quarters with a 30% price decline, and recovery took just 6 quarters.
The Impact of Global Shocks in the Early 2000s
The property market faced another downturn due to global shocks. The dot-com bubble burst in 2000 triggered a global recession, followed by the September 11 terrorist attacks in 2001, further impacting investor confidence and global markets. This double shock reversed the earlier recovery and pushed Singapore's economy into contraction. The economic conditions led to a longer property market dip lasting over 16 quarters. The property price index fell by 21%, and it took almost 4 years for prices to recover.
The Global Financial Crisis of 2008
The Global Financial Crisis in 2008 resulted in another property market correction. Prices fell by 26%, slightly more than the previous downturn between 2000 and 2004. However, buyers recognized Singapore's property market's track record of rebounding, limiting the impact. The dip lasted only 5 quarters, followed by one of the strongest rebounds in history. Between 2009 and 2013, property prices soared, reaching new all-time highs, prompting government intervention with cooling measures.
The Pandemic Lockdown of 2020
The last dip occurred in 2020 during the pandemic lockdown. Home prices and transactions decreased due to restrictions. This dip was mild, lasting only 1-2 quarters, with the index falling by 1%. Following the lifting of the lockdown, home prices quickly rebounded and continued to rise.
Key Learnings from Past Episodes
The episodes reveal several key learnings. Property price dips in Singapore almost always coincide with major external shocks. Each subsequent dip has become progressively smaller and shorter, potentially due to growing confidence in Singapore's property market and proactive government cooling measures. The introduction of the Total Debt Servicing Ratio (TDSR) has reduced price volatility, indicating a more resilient and fundamentally grounded market. Singapore's property market has demonstrated more stability compared to other major cities.
Current Market Trends and Potential Cooling
Although a major trade war is ongoing, a property market correction is not yet imminent. However, certain signs indicate a potential cooling down:
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Slowing Property Price Growth: Private property price index growth has declined, prompting revised growth estimates for 2025. The resale price index has also decreased.
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Dipping Transaction Volumes: Transaction volumes in the private resale market have been declining, signalling buyer caution.
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Disconnect Between Prices and Incomes: A widening gap between property prices and household incomes has led to a high price-to-income ratio, indicating reduced affordability.
Additionally, slowing global and regional trade, along with economic policy uncertainty, have led to a downgraded GDP growth forecast for 2025, raising concerns about a potential recession.
Factors Mitigating a Severe Downturn
Even if a recession occurs, any property market dip is likely to be mild. Interest rates have eased, making monthly repayments more manageable. The non-performing loan (NPL) ratio for housing loans remains low, but signs of stress are emerging. Limited future supply and shrinking vacancies point to a tightening market, potentially buffering against price declines.
Local buyers continue to drive demand, supported by consistent household formation and rising median household incomes. Singaporeans accounted for the vast majority of new home purchases.
Conclusion: Caution and Long-Term Perspective
While there are early signs of a property market cooldown, strong structural supports are in place. These include limited new supply, solid local demand, and relatively healthy mortgage conditions. However, a global recession or trade war could lead to job losses, weaker consumer confidence, and tighter credit, putting downward pressure on the market. Therefore, it is important to budget carefully, buy within one's means, and think long term when investing in property.
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