STRONG incomes and favourable government policies that encourage private residential ownership will contribute to an increase in the long-term demand for housing in Singapore, according to a recent study. HSBC Asset Management senior economist Connie Leung said residential demand this year was likely to reach 9,000 units - well above the 10-year average of 4,000 units. She said while demand grew, supply was also likely to increase to about 12,000 units and that prices of non-landed properties (condominiums and flats) would drop 10 to 15 per cent. On the other hand, the price of landed residential properties (houses) are forecast to rise 10 per cent this year. Demand for residential units has largely been stimulated by a Singapore Government decision late last year to release Central Provident Fund savings for home buying. This has been implemented in line with a government intention to increase the proportion of Singaporeans living in private housing from 13 per cent to 25 per cent by 2010, when the population is estimated to reach four million, according to the HSBC Asset Management survey. Loan applications under the Central Provident Fund residential properties scheme are forecast to increase above 20,000 this year, and annual gross withdrawals under the plan are projected to climb above S$3 billion (HK$15.3 billion) this year. Ms Leung said improving incomes would be another factor in generating demand, with family size also expected to become less over the next decade. HSBC Asset Management research shows that about 90 per cent of Singapore's 2.88 million people own their homes, with 82 per cent living in public flats and eight per cent residing in private residences. Of the rest who rent, half are private property tenants. Private properties are broadly divided into two categories - landed property (the choice of the wealthy) and non-landed property which is within the reach of average people. According to Ms Leung, while demand for residential units is forecast to increase, restrictions imposed by the Monetary Authority of Singapore on housing loans to non-resident foreigners, and recent changes in some policies offering public housing alternatives to potential private home buyers, would, among other things, contribute to a reduction in demand. Government measures are likely to hold down part of the oversupply of residential units. Earnings of developers are expected to be in the range of 30 per cent, bolstered by cuts in property taxes from 16 per cent to 15 per cent this year. According to Ms Leung, prospects are promising for the Singapore property market in the long term. In a recent regional report, Colliers Jardine says a growing pool of 30,000 expatriates also generated a significant demand for residential accommodation. Most professionals rent non-landed private residential accommodation, while less-skilled workers usually rent Housing Development Board flats, the survey says. More than 6,000 private residential units will be occupied this year, compared with the expected completion of in excess of 9,000 units, it says. The supply situation will push vacancy levels ''by almost three per cent over 1994 to 10 per cent at the year's end''. ''With reasonably stable annual absorption, and completion of 15,400 dwellings next year, and 17,300 in 1996, vacancies will rise further in these years,'' the Colliers Jardine report says. So far, in the year to June, net rents for prime apartments have fallen by 28 per cent to an average S$2,359 per month for two-bedroom units and S$3,959 per month for three-bedroom units. The report says prices of landed residential properties have risen over the past two years due to a great disparity between supply and buyer demand. Local residents who hope to own houses have been able to achieve their goals as a result of low prime-lending rates and financing costs, and also the liberalisation of CPF schemes on housing loans.