USD/SGD – Private home prices up 1.8% on-quarter in Q4 2012

Despite “cooling measures” enacted by the Government, demand for private properties in Singapore continue to rise. While level of home ownership in Singapore is high, a continuous rise in prices will eventually reach a “bubble” state if not controlled properly.

A large part of this increase can be attributed to foreign investments entering local soil, as investors and high networth individuals seek alternate avenues to park their cash after taking them out from US and the Eurozone. Mass market segment could potentially see more than 10% increase in prices in 2013 also due to increases in land price seen in site tenders from the Government.

All in all this is certainly not good news for the Singapore economy especially when the manufacturing sector is on the decline.

What does this mean for SGD? Should offshore demand for local housing remain high, SGD will continue to remain attractive to be held. Reluctance by the local Central Bank (MAS) to weaken SGD outright will further encourage foreign investors to commit to SGD in the longer term. Nonetheless, agents have been spotted selling SGD around current levels, and there is always the risk that FIs will be pulled out when investors feel confident enough to re-enter conventional markets in US and Eurozone.

All these factors make current levels highly precarious and we could potentially see huge directional movements should prices break away from current range.

SGD has been relatively muted since QE3 announcement back in 2012 Sep

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