ST: Private home prices starting to dip

Private home prices starting to dip


Experts expect gradual downtrend, but not lows of financial crisis days


By Joyce Teo


IT IS a bit like the dog that didn’t bark in the night: Economic growth is slowing, shares are crashing and property sales have slowed, yet private home prices have refused to take the hint and fall.


Indeed, they have barely budged since the slowdown began about nine months ago, despite conventional wisdom saying they should be plunging.


But property experts see increasing signs that a price fall is coming, and while no one knows by how much, few believe a crash is on the cards.


Anyone waiting for bargain basement deals might be out of luck, with the local market trading at a higher range based on the country’s rosier long-term prospects.


Prices are being kept up partly by low mortgage rates and the ability of developers flush from last year’s bumper returns to hold off launching new flats.


A seasoned market watcher said the impression that Singapore was not dramatically hit by the United States’ sub-prime woes has helped keep prices stable.


However, new sales have slowed significantly, and prices are starting to reflect this. The Urban Redevelopment Authority showed that private home prices inched up just 0.17 per cent in the second quarter – the least in four years and well below the 3.8 per cent in the first quarter.


With price growth disappearing amid sluggish demand, a downtrend – with a bigger blip seen for the luxury sector – seems inevitable, said market watchers.


Private home prices are still beyond the reach of most owner-occupiers, said Chesterton International’ s head of research and consultancy, Mr Colin Tan.


But any correction is likely to be gradual, with experts tipping a timeframe of a year or more. It will not be steep at this point as interest rates are low and the economic outlook is not that bad.


Mr Tan said home prices will take a long time to fall because the decline is being led by individual investors. They will be forced to sell when their rentals cannot meet mortgage payments, a situation that will become increasingly apparent as more units go on market.


These will mostly be the flats bought at the market’s peak around the middle of last year, said the market watcher.


Investors who bought low under the deferred payment scheme will be able to sell below developers’ asking prices and still make a profit. When they do, their deals will weigh on the market, he said.


‘The decline will not be led by developers as they have profited immensely from the price run-up in 2006 and 2007,’ added Mr Tan. ‘At the moment, they only have to sell enough units to keep revenue streams flowing.’


If the market remains weak in the next six months, prices could easily fall 20 per cent to 30 per cent on average over a period of time to levels seen in 2006, with the high-end sector bearing the brunt.


Still, the lows seen in the post-Asian financial crisis days or the Sars period are gone forever unless Singapore is hit by a major catastrophe, experts say.


‘We do not see a repeat of the prices in 1997 or 2003 because those were big shocks,’ said National University of Singapore associate professor, real estate, Mr Sin Tien Foo. ‘There is no bubble effect.’


Besides, prices hinge on quality. ‘Nowadays, people are looking for better designs and materials, which would increase developers’ costs,’ he said.


Jones Lang LaSalle’s head of research for South-east Asia, Dr Chua Yang Liang, said: ‘Theoretically, property values appreciate over time.’


While poor fundamentals can send prices below the replacement cost level, this is an unlikely scenario here as fundamentals have been good and look to remain stable, he said.


Singapore‘s employment rate is still strong and income growth stable. As the director of Savills Residential, Mr Ku Swee Yong put it: ‘The sellers are not losing their jobs.’


Source: Straits Times

Private property sales jumped 52.6% last month

Private property sales jumped 52.6% last month


Judging by home sales for May, the worst may be over for the private residential market.


But analysts aren’t counting the chickens just yet.


The private residential market may have seen the worst for the year.


The number of private residential units sold in the month of May was up by 52 per cent over April to 441 units including executive condominiums.


According to the Urban Redevelopment Authority, there were an additional 152 units sold for May as compared to the month before.


Joseph Tan of CB Richard Ellis said this was partly a function of supply as developers launched more new units for sale compared to April, to provide potential buyers with more choices


Savills Singapore’s Director of Marketing and Business Development Ku Swee Yong.


“I think there are certain circles that are thinking that the bad news has been mainly priced in. I think we’ve defintely seen the worst for number of transactions in April. So 441 transactions in May looks pretty healthy. Over the next 2 months, it depends on whether developers are willing to launch. There may be a few launches coming up just before the hungry ghost festival.”


The average median price per square foot for a unit sold last month also rose slightly, to around 1,222 dollars, from April.


And the priciest unit sold for the month of May was from Scotts Square at 4,612 dollars per square foot.


Mr Tan of CB Richard Ellis said contrary to market expectations, prices of luxury homes seemed to hold firm.


Some projects such as Boulevard Vue and Scotts Square continue to see sales at around 3,000 dollars per square foot.


He said the sales momentum in May has continued in June so that the number of new homes sold is likely to be better.


This is also because more projects are expected to be launched such as Dakota Residences and The Amery.


In all, the property consultancy expects the total sales volume of new homes in the second quarter to be about 80 percent more than the 762 units in the first quarter.


But Nicholas Mak, of Knight Frank, says that the road ahead is still uncertain.


“I think we’re still going to continue to see some turbulance in terms of prices as well as in home sale volume. It’ll probably fluctuate within a certain narrow range, for example, we expect home sales by developers to fluctuate between 300 to 600 units sold every month for the remainder of 2008.”


Source: 938Live