MANY may find this hard to believe but property prices in Singapore are more affordable today than 10 years ago, when measured against income growth, said an economist from DBS.
While property prices in the city state are up 55 per cent since March 2009 - when the global crisis ended - income has grown much faster, said DBS managing director and economic and currency research head David Carbon.
"Based on simple averages, that makes housing more affordable, not more expensive," Mr Carbon said at a media briefing yesterday.
In Singapore, home prices have risen in tandem with income over the past five years. In addition, home prices are now 15 per cent lower compared with 2000.
In contrast, Hong Kong has seen home prices relative to income surging 78 per cent since 2000, which signals an asset bubble, he said.
In Asia, property prices are now as high as they were in the United States just before the eruption of the sub-prime mortgage crisis. The rise in real estate prices in the region has been fuelled by low interest rates spurring capital inflows and strong income growth.
In terms of the rise in regional property prices, Singapore and Hong Kong topped the list.
But even if income levels are rising in parity with property prices, Mr Carbon highlighted a potential red flag - growing debt loads.
Household debt in Singapore has risen significantly in recent years and this could pose a challenge when interest rates start to go up, Mr Carbon said. This is because real estate is the most interest rate-sensitive asset class, he added.