THE Monetary Authority of Singapore (MAS) yesterday said home prices are expected to continue to grow this year - after climbing 4.6 per cent in the first quarter, the highest growth seen in seven years.
Strong foundation: The recovery of the construction sector continued in early 2007, underpinned by ongoing work in the residential segment, said the MAS
The gain, which has so far been greatest for the luxury market, could also filter down to other mid to high-end segments which could benefit from the steady stream of buyers who have sold their houses in en bloc sales, Singapore's central bank said in its latest Macroeconomic Review.
MAS expects the property upturn to spill over to the construction and financial services sectors.
'Contracts awarded have trended up steadily from 2003 to reach $16.1 billion last year, a level not seen since 2000. This is expected to translate into higher certified payments and value added for the sector in the near term,' says MAS. 'Indeed, the recovery of the construction sector continued in early 2007, underpinned by ongoing work in the residential segment.'
A number of ongoing major projects including the Marina Bay Financial and Business Centre, the integrated resorts and the downtown MRT extension, are also expected to further fuel the recovery in the construction sector.
The recent spike in raw material costs caused by disruptions to the supply of sand has not resulted in delays in building projects, MAS says. But the bank warns that in the future, new developments could be slowed or delayed if sand and concrete become more difficult to obtain.
The large number of upcoming new commercial developments should also see more credit being extended to the building and construction industry, MAS says. This is expected to benefit the financial services sector.
And on the consumer loans front, while mortgage loan growth has remained tepid in recent quarters, some upside could be seen in the months ahead as the residential property uptick at the luxury end begins to spread to the broader market.
MAS also says that the recent upswing in property prices will have only a small impact on inflation this year. This is mainly because substantial price increases in the near term should be largely confined to the upper and middle segments of the private residential market, MAS predicts.
'On balance, the impact of rising property prices on consumer price index (CPI) inflation is likely to be modest, with the direct impact contributing only 0.1 percentage point in 2007, compared with the average of negative 0.2 percentage points over the past three years,' says MAS.
