Why is there a looming downside risk in private home markets?

Possible stagflation because of the Russia-Ukraine conflict may greatly affect the market.

There could be downside risks for private residential markets in Singapore following the softer economic outlook and possibility of stagflation that might be aggravated by continued Russia-Ukraine conflict, OCBC said in its latest equity research.

Citing the Urban Redevelopment Authority’s (URA) Private Residential Property Index (PPI), OCBC also noted that the private home prices in Singapore went up 10.6% in 2021. It added that the URA Private Residential PPI also rose by 14.1% from its last trough in the first quarter of 2020.

Even as December 2021 new property cooling measures will likely dampen consumer sentiment and demand, OCBC underscored that the private residential market will remain resilient, especially for first-timers and upgraders demand, due to the unrevised Additional Buyer's Stamp Duty rates for Singapore citizens and Singapore permanent residents.

On transactions, the number of private new home sales, except for executive condominiums, increased 30.5% to 13,027 units in 2021, which was the strongest level since 2013.

However, OCBC said historically, “volume changes have been more sensitive and volatile than price changes” because potential buyers may choose to adopt a wait-and-see approach.