By CHUN HAN WONG And GAURAV RAGHUVANSHI

SINGAPORE—Singapore residential property prices rose sharply in the fourth quarter as persistently low interest rates and continued capital inflows fueled demand, raising the prospect that the government could step in to help cool the market.

"The increased momentum [of quarterly price rises]—particularly in the mass-market housing segment, as well as the return of buying interest in the high-tier segments—is likely to keep authorities on high guard and has further heightened policy risks," said Colliers International property analyst Chia Siew Chuin.


While government measures taken in 2012 likely prevented even faster gains in prices, "low interest rates and high liquidity continue to persist and drive demand for homes," she said.

The country's private-residential property price index rose 1.8% in the fourth quarter from the third quarter to a record 211.9 points, which marked the third-straight quarter of growth, according to preliminary data from the Urban Redevelopment Authority. The home-price index rose 0.6% in the third quarter and 0.4% in the second.

Analysts say the data could push regulators to contemplate further action. They have repeatedly tried to temper exuberance in the real estate market in recent years, rolling out six sets of cooling measures since September 2009. Most recently, regulators tightened home-loan rules in October.

Other previous steps included additional stamp duties for some buyers, with higher levies for foreigners, as well as the imposition of tighter rules on the development of small "shoebox" apartments, or units with floor areas of 500 square feet or less, in Singapore's suburbs. Authorities also raised down-payment requirements and increased land supply for developers.

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Munshi Ahmed/Bloomberg News
Condominium blocks tower above the area around Orchard Road in Singapore. The city-state saw residential property prices rise sharply in the fourth quarter, and government cooling action could follow.

The fourth-quarter price growth is the fastest since the second quarter of 2011, when prices rose 2.0% from the quarter before. Private-home prices have now surged 59% since the market's most recent cyclical trough of 133.3 points in the second quarter of 2009, prompting growing public complaints over housing costs.

"The quarter-on-quarter price growth is quite stunning compared with previous quarters," given recent domestic economic fragility and that the fourth quarter is typically a lull period for the market, said Chua Yang Liang, head of Southeast Asia research at property consultant Jones Lang LaSalle JLL +1.97% .

This suggests a greater chance of fresh government intervention over the next month or so, Mr. Chua said, adding that any new measures are likely to target investment demand, potentially by raising transaction costs.

The government may also want to give some momentum to any natural cooling that could come this year, given that authorities forecast the economy to grow 1% to 3% in 2013, potentially faster than 2012's 1.2% expansion but considerably slower than in 2010 and 2011.

"A more challenging economic environment and cautious employment prospects" could mean prices start to stabilize, although demand should stay supported by low interest rates and as volatile financial markets push investors into property, Ms. Chia said.

In a note, Deutsche Bank DBK.XE +3.70% analysts Elaine Khoo and Gregory Lui said they expect prices of lower-tier private homes to ease by 1% to 3% this year, with overall sales volume likely down more than 20% from 2012 levels, "as pent-up demand is gradually satisfied, consecutive round of measures take effect and lower number of shoebox units on offer."

The fourth-quarter data suggest prices were driven by demand for suburban apartments, which have been more affordable for owner-occupiers. Prices of non-landed private homes outside Singapore's central region rose 3.4% in the fourth quarter from the previous quarter, accelerating from a 1.0% rise in the third quarter.

Most of the year's price gains came in the latter part of 2012. For the whole of the year, private-home prices rose about 2.8%, down from a 2011 increase of 5.9%.

The preliminary data are based on transaction prices compiled in the first 10 weeks of the quarter, the Urban Redevelopment Authority said. Final figures will be issued in four weeks.

Prices for public housing have also been on the rise. Prices for previously-owned public units rose 2.5% in the fourth quarter from the third, accelerating from a 2.0% rise in the third quarter, according to preliminary estimates published Wednesday by the Housing and Development Board. Prices of resold public housing are up nearly 47% since the market's last cyclical trough in the first quarter of 2009.