Singapore's yuppies are using surplus cash and cheap credit to snap up residential properties, sending prices rocketing upward and sparking concern about the impact of all this property activity on banks.
Property analysts said professional couples and singles in their 20s and 30s are withdrawing cash from Singapore's unique government-sponsored savings plan and taking advantage of cheap mortgage rates to buy property.
Many of the properties are being rented to Singapore's growing expatriate community, estimated at more than 300,000. Expatriates pay a monthly rent of between $1,850 and $4,950 for a condominium apartment, most of it reimbursed by their employers.
Lee Ek Tieng, managing director of the Monetary Authority of Singapore, told banks recently to keep adequate margins on loans against property in case the property market collapses.
But everyone else seems to be bullish.
"Young investors are plentiful. Many are buying condos in the $250,000-$310,000 range as they foresee it can fetch enough rental to finance itself," said Suzie Tan, an official at ERA Realty Network Ltd.
Young investors are buying one and sometimes two apartments for rental, said a property analyst at Knight Frank.
Analysts said changes in Singapore's demographic pattern partly explain why most buyers are young.
The 1990 census shows that those 25 to 34--who make up 21.4% of Singapore's 2.7 million population--increased 2.8% from 1980.
One bank said up to 35% of its loans go to Singaporeans 26 to 35.
The buying spree has fueled property prices.
The State Urban Development Authority's Private Property Price index revealed that property prices have risen 18.6% since 1990.
Potential buyers can borrow from the bank or they can draw on Singapore's compulsory savings plan, the Central Provident Fund. This allows members to withdraw savings for specified investment, such as residential property or stock.
Under the CPF plan, Singapore employers and employees set aside 40% of a monthly salary for retirement savings, which becomes available at 55. The funds can be used beforehand to buy homes or for investment.
If there is enough CPF money, it can be channeled to a second or third property.
As of June this year, 104,424 CPF members had withdrawn more than $5.8 billion of their funds to finance private housing, up 4% over the previous quarter.
A property consultant with Jones Lang Wootton said more young couples with joint CPF money were finding it easier to buy private properties now than 10 years ago because of low interest rates for housing.
Part of Singapore's economic success story is that more than 90% of its people own homes.
Analysts said this would not have been possible without the CPF lending money at an annual interest rate of 3.31% and bank interest rates averaging only 6.5%, the lowest in the past three years.
The loans can be repaid over a period of 20 to 30 years.
Singaporeans, among the richest people in Asia with a per-capita income of over $12,400, are more attracted by property, which offers hefty capital gains in the medium term, than any other investment these days.
The stock market is sluggish. Banks offer little alternative, with interest for time deposits at a three-year low of around 3.4%.
"Buying properties is the best way to lock in on inflation," said Simon Foo, a 28-year-old bank executive.
Foo recently bought a three-room condominium in a suburban area. The rental return and capital gain more than offset the inflation rate of 2.4%, he said.
Eight months ago, a doctor in his 30s bought a three-bedroom flat for $621,000 and immediately rented it to an expatriate family for $4,000 a month.
"Last month, a developer came and wanted to buy it, and the price offered was $931,000," he said.