The real estate market of Singapore, the second most expensive property market in Asia, seems to be showing evidence of cooling down as the government's efforts to hold down prices pay off.
According to Bloomberg, both construction output and home prices in Singapore have fallen as compared to the figures recorded at the same time a year ago.
Construction activity reportedly fell 2.7 percent in the last three months ended September. Home prices also declined in September for the fourth consecutive quarter marking the longest period of declines in five years.
Simultaneously, a Reuters poll showed that construction activity lost steam on a quarter-on-quarter basis expanding only 1.4 percent - down from the 4.1 percent in the second quarter. Also, Knight Frank said that property prices dropped 7.3 percent in the first six months of 2014.
The statistics are proof that the cooling measures that the government has been implementing since 2009 are paying off. Prices rose by more than 60 percent in the Lion City between 2009 and 2013 and are now finally declining. Experts say that the pace of cooling of construction activity was unexpected.
"The whole cooling measures, plus foreign manpower curbs are really starting to bite. It's no surprise that you see construction continuing to cool, but the pace of the cooling in the third quarter, I must say, was a little bit eye-boggling," Selena Ling, economist at Oversea-Chinese Banking Corp. in Singapore, told Bloomberg.
The property market slowdown will have a great impact on Singapore's economy.
"The bigger risk for the Singaporean economy is the property asset market cooling down, rather than physical construction activity cooling down," Seng Wun Song, regional economist at CIMB bank, told CNBC.
"If the pace of the global economic recovery continues to plod along rather than pick up steam, the deceleration in Singapore asset prices could be sharper than the current 10-15 percent range, which would have repercussions on equities and for the wealth effect," he added.
