Prices of homes in Singapore could continue to slide next year and fall by up to eight percent, compared to a drop of about three percent in the first ten months of 2015, revealed JP Morgan in an AsiaOne report.
With declining residential values, consumer prices have steadily dropped in the past 12 months. This raises fears over deflation, which happens when the inflation rate decreases below zero percent.
“Overall, it makes for a fairly challenging outlook for domestic demand,” said Aditya Srinath, chief of ASEAN equity research at JP Morgan.
Nevertheless, the looming interest rate hike in the US could help some sectors of Singapore’s economy, but this could be offset by gloominess in China and weaker domestic consumption.
In addition, the city-state is experiencing a patch of slow growth as it’s not easy to transition an economy that was heavily reliant on foreign workers to one that is geared towards higher productivity, but with limited foreign manpower.
Given the situation, JP Morgan has taken a cautious view on investing in Singapore, rating the country as underweight for 2016, Srinath added.