You need to do some mental housecleaning to understand what is going on.

The strong recovery of the Singapore private residential market has taken many by surprise. To market observers, this recovery seems surreal because, unlike the previous market recovery in 2010 (post Global Financial Crisis), where the local economy rebounded by a strong 15.2% and the URA Property Price Index responded with only a 17.6% YoY increase, this time, even if we see the 2018 economic growth rate hit 4.5%, well above market consensus, it will pale in contrast to the previous recovery. Yet private residential prices in Q1/2018 have already risen 3.9% QoQ or an annualized rate of 16.5%. So what is driving this sharp price recovery? To begin, we need to do some mental housecleaning. While it appears logical to associate GDP growth with most business sectors, for private residential properties, it can also turn out to be an archaic correlation. Visits to show flats leave a discerning observer with the impression that an increasing number of buyers at new launches are funded in part by their parents’ i.e. baby boomers’ money. This new engine of funding turns the economic correlation from a contemporaneous and/or forward-looking one to a multi-year, back-facing specification. Moving forward, until the day our ageing demography can no longer influence the market, housing demand may not necessarily be driven by traditional variables like interest rates, demographics and future economic performances. Rather, historical GDP growth rates will increasingly play a part. On top of that, theoretical investment function variables like interest rates, may, within bounds, lose their significance. The rear view mirror reflection of GDP represents the level of savings by the baby boomers. Therefore, unless we expand our frame of reference to include the past, we will continue to misread the market by ignoring the savings level of the population of potential buyers.

http://pdf.savills.asia/asia-pacific...ng-q1-2018.pdf