Will the government implement cooling measures on home prices?

Real estate services provider Savills thinks the case for cooling measures on the residential market is weak.

The continued increase of home prices and rents have led some to speculate that the government might soon implement cooling measures.

But according to real estate services provider Savills, this is unlikely.

“If we use the tracking error (TE) to compare private property price growth to nominal GDP growth (computed as Standard Deviation of [URA PPI rate of change – Nominal GDP rate of change]), the TE from the year 2000 to 2020 was 6.83%. After a recent raft of cooling measures, the TE from 2013 to 2020 dropped to 6.17%,” it said in a report.

It noted that for active portfolio managers, these numbers are generally respectable if they have been outperforming the benchmark index. It added that for the private residential market here, the authorities play a reverse role to portfolio managers and would wish to have private residential prices not outperform nominal GDP growth.

“They have over-achieved because of the slew of active measures, from the year 2013, the URA PPI change (annual) has been growing at a compound average growth (CAGR) of 0.06% vs 2.87% for nominal GDP. When compared to household income growth, the URA PPI had also been lagging for these two periods,” Savills said.

The firm said that rumors of cooling measures may have been fanned by people who want to drive fear into the minds of potential buyers.