SINGAPORE/HONG KONG – Singapore’s housing prices have reached a bottom and will rebound, while Hong Kong’s “crazy” housing market will continue to defy gravity, according to BNP Paribas.

“Very significant” income growth will drive the recovery in Singapore’s home prices, said BNP’s Asia-Pacific head of research for financial institutions and property Wee Liat Lee. This will boost prices by 10 percent to 15 percent over the next 12 to 15 months, and may in turn lure foreign buyers, especially Chinese, Lee said.

Singapore home prices have dropped for 15 consecutive quarters — the longest slide since data was first published in 1975 — as the government rolled out a series of cooling measures. Home prices in Singapore are 12 percent lower from their 2013 peak, while Hong Kong prices reached record highs earlier in 2017.

“Hong Kong has been a crazy market, prices will never come down,” Lee said.

With China’s government stemming capital outflows, money has become stuck in Hong Kong, he said. “If you’re in a country where the physical amount of investable assets is really small, then the liquidity will squeeze the asset price very quickly.”

Singapore ranks better on affordability. The house price-to-income ratio has declined from 12 times to 10 times in the past decade, while in Hong Kong it has climbed from 11 times to 15 times, Lee said.

“All asset prices in the world in the next 10 years are going to be priced according to Chinese liquidity,” Lee said. “Especially in markets where the stocks of such assets are small, that’s going to squeeze the asset price very substantially.”

Source: Bloomberg