Can Housing Prices double by 2030

A report by Morgan Stanley claim property prices in Singapore can increase by 10% in 2019. In fact, they predict housing prices can double by 2030. Given the cooling measures, can it really perform?

The Morgan Stanley report that we have on hand predicts home prices rising by 10% by the end of 2019:

“Despite the latest round of cooling measures and an environment of rising interest rates, we think home prices can continue to rise another 10% by end 2019. Home prices rose in four of the last five rate hike cycles, underpinned by healthy economic growth.

With the anticipation a wave of capital inflows into the housing market from en bloc beneficiaries and HDB upgraders, while housing supply is still below historical average.

Morgan Stanley are still fairly confident of home prices doubling by 2030, or 2034 in a bear scenario:

“In particular, we argue that residential property as an asset class in Singapore remains attractive, and we expect home prices to double by 2030, as Singapore’s economy continues to outperform DM peers over the medium term.”.
Now is all this just hot air, or could it really happen? Combing through the report, Morgan Stanley identifies a few key drivers behind their prediction. Here’s where we have certain doubts:

1. Return of high-skilled workers to raise housing demand 
Despite the household formation continues to grow, still unsure of higher -skilled workers to continue to drive housing demand.

2. “Singapore’s awesome economy will sustain our property habit”

With the fact that Singapore growth has outpaced many developed economies at over 3%(most developed economies are managing 2.3% on average.

Singapore is an export economy, and we’ve made our wealth on global trade. The US and China are now locked in a trade war, and the world’s biggest economy also seems to be embracing protectionism (bigly). If all goes well,
Singaporeans could all get richer and afford more houses.

3. “New HDB measures will propel demand for private property”

Morgan Stanley’s argument is that the new public housing initiatives (HIP II and VERS) announced by policymakers will boost HDB resale prices. As in the longer run VERS helps even the pace of redeveloping HDB estates that reach the 99-year mark, which helps to stabilise supply and (in our view) the outlook for price appreciation.”

The data from the Urban Redevelopment Authority (URA), median home prices in the first two quarters of this year were around $1,319 psf. This is close to the last peak, which was in 2013. However, prices had previously fallen by around 11% from the last peak in 2013, before the accelerated pick-up from late 2017 onwards.
In the span of less than a year, we saw a rebound of almost 10% — and it would have kept going if the government hadn’t intervened. Our property market has shown us that these jumps are possible.

However, this still hinges on two main conditions; mainly that the overall economy remains strong, hence Singapore cant be badly hit by trade tensions ; lastly our Singapore government had constantly keeping up on home prices that are manageable. However, they are not confident that prices can continue to rise, without further policy intervention.

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