Be mindful nascent recovery in home prices doesn't turn into runaway train

If anyone is in doubt that the property market is roaring back, he needs to look no further than last week's tender for an executive condominium site at Sumang Walk in Punggol.

The tender drew 17 bids. Each and every one of them was higher than the previous record set in July 2013 for the Lake Life site in Tao Ching Road near Jurong Lake. The top offer for Sumang Walk was also 64 per cent higher than the winning bid for the Anchorvale Lane site in August 2016, which was the last EC tender prior to last week's.

Analysts have estimated the breakeven cost for Sumang Walk to be above S$1,000 per square foot, higher than recent new EC transactions in the area. It is not unreasonable therefore to expect the average selling price for this project to be 20-30 per cent higher than previous ECs. This is worrisome as the hunger by developers for residential sites has filtered down to the hybrid housing market and raises questions about whether the series of cooling measures introduced by the government between 2009 and 2013 remain effective today.