In the Savills blog, executive director Alan Cheong recently examined the correlation between Singapore’s GDP, and rising property prices. In this recap, we’ve picked out the crucial points that we feel are most useful to home buyers/investors right now; along with some thoughts and on-the-ground observations.

First, why align home prices to GDP?

This was the first area we looked at, since it’s often asked whether home prices should have any relation to GDP. Savills highlighted the following advantages, in aligning the two:

  • Prevents further deterioration or improvement of a modified Gini coefficient for asset prices (the Gini coefficient is one way to describe inequality. In a broad sense, the division between haves and have-nots in Singapore is well reflected by the kind of housing we buy. 
  • Reduce odds of overconsumption in residential real estate (prevents too much buying into residential properties) 
  • Matches changing home prices with productivity changes*
  • Keeping household debt in check