Singapore's property market has entered a standoff between bargain-seeking buyers and developers sticking to their pricing guns, with March's new home sales dropping 83 percent from a year earlier.
"Buyers think they can have their cake and eat it," said Alan Cheong, senior director for Singapore at Savills Research. "They are expecting the other side to lose money on their behalf. That idea doesn't work if you have an economy that's fully functioning," he said, citing the city-state's unemployment rate of only around 1.8 percent.
Property prices and sales in the city-state, a key regional financial center, are closely watched for cues on whether the government can safely guide the market to a soft landing amid expectations interest rates will rise.
Some of Singapore's borrowers, many of whom already have high debt loads, may become stretched if interest rates rise and there are concerns they could dump their properties into an already slowing market if their payments rise.
Sales of new private homes came in at 480 units last month, compared with 2,793 in March of 2013 and 739 in February. Helping to keep a damper on sales, developers have been holding back their launches as they tweak marketing strategies and watch how competitors' projects fare, Cheong noted.
It isn't clear that prices are following sales lower. While prices might appear to be falling, often latest sales are on lower floors or have a loft ceiling, which decreases the dollar-per-square-foot price, Cheong noted.
"On higher floors, they're holding prices very firmly and giving incentives to agents to clear lower floors," which are viewed as less attractive, he said.
Others think it's the developers, not the buyers, who aren't being realistic about pricing.
"It's the property developers that need to moderate the price," David Kuo, Motley Fool's CEO for Singapore, said. "The housing market has overtaken the growth in the Singapore economy. House prices are, too put it mildly, unaffordable," he said.
Prices have surged over 60 percent since 2009, propelled by rock-bottom global interest rates and quantitative easing in developed economies, even as Singapore's government has enacted a series of cooling measures to prevent a bubble from forming.
The Knight Frank Wealth Report ranks the city-state as the fourth most expensive real-estate market globally, after Monaco, Hong Kong and London.
"(Developers) are expecting wages to accelerate to such extent that they can afford the property, which isn't going to happen anytime soon," Kuo said. "It's not everybody who can pull out their wallets and get a million dollars to afford a property."
Kuo noted one of the government's cooling measures, the Total Debt Servicing Ratio (TDSR), has limited potential buyers' ability to get bank loans, damping sales.
The TDSR aims to ensure that buyers' monthly payments do not exceed 60 percent of their income, so they wouldn't be caught out by a spike in interest rates. Most mortgages in Singapore have adjustable, rather than fixed, rates.
"Affordability is the part of the jigsaw they need to figure out," Kuo said.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter
Correction: This story has been corrected to reflect that the drop in March new home sales was 83 percent from a year earlier.