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AFTER four years in the doldrums, the rapidly recovering property market is expected to give the Singapore economy a lift in 2018 - possibly pushing overall growth to come in stronger than expected, said private sector economists.
Alongside an electronics surge and external growth, the property sector was ranked among the top three upside factors for the economy next year, according to the Monetary Authority of Singapore's (MAS) Survey of Professional Forecasters. Some 23 economists and analysts responded to the latest quarterly survey sent out on 23 November.
Economists say the property market's recovery could filter down to the economy in several ways - via en bloc-driven replacement home purchases, construction of new homes, surge in mortgages and consumer spending from en bloc windfalls.
ANZ Bank economist Khoon Goh said owners from successful en bloc sales will be in the market to buy another property. "This will push up real estate activity and could see some upward movement in property prices."
But he expects rises to be modest. With more en bloc deals, construction activity is also likely to pick up in the coming year. "We think construction will recover from the slump in 2017 on the back of a robust private property market recovery and en bloc fever," said Maybank Kim Eng economist Lee Ju Ye.
This uptick in construction sentiment is reflected in the latest MAS survey; economists forecast growth of 1 per cent for 2018 after a decline of 7.6 per cent in 2017. Ms Lee noted that a property market recovery will not only boost the real estate segment, but also lift the finance and insurance services sector as housing loans are likely to go up.
It could also see the wealth effect in action as people who benefited from en bloc activity will have more cash on hand, which could filter down to greater consumer spending over the next year, economists said.
Such views of the real estate recovery trickling down to other sectors in 2018 are being reinforced by a slew of positive property data this year.
Private home prices rose 0.7 per cent in the Urban Redevelopment Authority's (URA) latest third-quarter data - its first after 15 consecutive quarters of decline.
But most notably, it is the unprecedented en bloc sales trend this year that has made market watchers sit up. In 2017, some 28 collective sales (and counting) have been awarded - a sharp contrast to the three en bloc deals last year.
Economists estimate that property-related segments, which include real estate and construction, make up about 9.6 per cent of Singapore's gross domestic product (GDP).
Respondents in the MAS survey expect both headline and core inflation to go up next year to 1 per cent and 1.6 per cent respectively, from 0.6 per cent and 1.5 per cent in 2017.
However, Credit Suisse economist Michael Wan said that it is not all good news if the property market gets too exuberant.
"There is the risk that if prices move up too strong and too quickly, authorities could clamp down on it. It could also feed into inflation and wage pressures," he said. But while the impact of the property market on Singapore's growth cannot be ruled out in 2018, economists expect growth to come in at a slow and steady rate. The survey found that economists believe growth momentum will continue next year, albeit at a moderated pace with a 3 per cent full-year expansion. Growth in 2017 was pegged at 3.3 per cent, up from an earlier 2.5 per cent forecast in September.
Their expectations are in line with recent forecasts by the Ministry of Trade and Industry (MTI). The MTI recently upgraded Singapore's 2017 growth forecast to 3 to 3.5 per cent, up from an earlier estimate of 2 to 3 per cent. Next year, MTI expects the economy to expand between 1.5 and 3.5 per cent, with growth likely to come in around the middle of the range. Despite seemingly slower growth projected for 2018, economists say that the quality of growth is expected to be more balanced and less driven by electronics compared to this year.
Said Maybank Kim Eng's Miss Lee: "GDP growth in 2017 was led by manufacturing as well as trade, but services has been picking up. We think that in 2018, a larger share of contribution to growth will come from services, as manufacturing subsides."
According to the survey, manufacturing is forecast to grow 5.5 per cent in 2018, down from the 10.6 per cent projected the year before. But other services sectors such as finance & insurance, wholesale & retail trade, and accommodation & food services are expected to pick up in 2018.
With semiconductor demand likely to ease in the coming quarters, this turnaround in services - which makes up two-thirds of the economy - is significant as it makes economic growth more sustainable, said DBS economist Irvin Seah. "Drivers of the economy could interchange, with services likely to take a commanding position in the coming years," he added.
On the labour front, Singapore's unemployment rate is projected to be 2.1 per cent at the end of 2018 - a slight improvement from the 2.2 per cent forecast for 2017.
The top three downside risks for the Singapore economy continue to be a slowdown in China, geopolitical concerns and trade protectionism.