According to Knight Frank’s Global House Price Index, private homes in Singapore showed the second-largest price drop in Asia while China took first place. The recently released index showed that Singapore non-landed residential prices dropped by 3.2% year on year while on a quarterly basis prices fell by 0.8%.

The article in The Business Times points out that the continued fall in the prices of non-landed private homes in Singapore shows the persistent weakness of the market. Prospective buyers are cautious due to further anticipated price corrections combined with existing cooling measures. As the end of the year approaches, the private homes market in Singapore is expected to see continued downward pressure in both rental performance and in prices.

This is due to a combination of different factors that include the possibility of an increase in interest rates, the continued slowdown in Singapore’s economy as well as macro-economic uncertainties and an increased supply of private homes. Overall prices of private non-landed homes in Singapore are anticipated to decline by between 3% and 4% on a yearly basis by the fourth quarter of this year.

However things are even worse in China where prices have fallen by 5.7% year on year although the country did show a positive quarterly growth of 0.2%. Elsewhere in Asia, Hong Kong prices have increased massively in spite of policymakers cooling measures. Mainstream prices have increased by 20.7% year on year making Hong Kong the market with the highest increase in prices in Knight Frank’s Global House Price Index.

Experts point out that while it’s likely concerns about the economy in China could affect the Asia-Pacific region, the actual impact isn’t necessarily straightforward. Although economic growth is a key factor for future house price increases, when there is any sort of economic turbulence property is often seen as a safe haven. The continued postponement of an interest rate increase in the US is expected to continue providing many markets with a low cost of debt.

Annually the index rose by just 0.1% in the year ending in June. This is the weakest rate of growth since the last quarter of 2011. The index tracks 66 housing markets and 27% showed an annual decline in prices compared to 44% in 2011.