Lessons to be gleaned from Singapore's property boom

Gillian Tett:

If you talk to financiers in Singapore these days, the topic of property prices keeps cropping up but, unlike in America, it is not the threat of further real estate market falls.

Instead, as Wall Street worries about American house prices - exemplified by a downbeat report from Goldman Sachs this week - in Asia there is mounting concern about property booms-cum-bubbles.

Thus far this year in Hong Kong, for example, residential property prices are estimated to have surged by about 25 per cent. In Singapore the increase is calculated at more than 15 per cent. However, on a visit to that city this week, I was repeatedly told by locals that these figures may be understating the trend: in prime residential and business centres, there is reportedly such a bidding frenzy for good assets, that prices are far higher than official data imply.

The trend is striking for at least two reasons. For one thing, it provides another graphic sign of an issue I discussed in last week's column - namely the degree to which a flood of money in the global financial system is now potentially creating new mini-bubbles in certain asset classes.

To be fair, this is certainly not the first time that Asian property markets have been on a roller-coaster ride. After the Asian crisis a decade ago, prices swung dramatically too. And this year's price surge has still not reversed the dramatic tumble seen last year. The Asian property index is still "only" trading back where it was in the spring of 2008, below the dizzy peaks of 2007. Nevertheless, the sheer scale and speed of this year's rebound has taken even locals by surprise. And while part of the boom reflects optimism about Asian growth prospects, another key factor is that investors round the world are now frantically searching for yields, amid the ultra loose western monetary policy (which, by default, translates into loose policy into much of Asia too, due to fixed exchange rates).