A likely fall of 21.6%

Non-landed prime districtproperties to bear the brunt: DTZ

THE fallout from the financial crisis is hitting the private home market hard, with one estimate putting the drop in private home prices at 21.6 per cent this year, a plunge not seen since the 1997 Asian financial crisis.

DTZ’s dramatic estimate is based on caveats lodged on Urban Redevelopment Authority’s (URA) REALIS portal. However, other analysts were not as pessimistic.

The segment that was worst hit was non-landed properties located in the prime district area.

“After posting two consecutive quarters of around 4.5 per cent decline each, prices of non-landed freehold private homes in the prime districts fell by 14 per cent quarter-on-quarter in Q4 2008,” said DTZ in a press release yesterday.

Activity in the private residential market was also much lower compared with last year. DTZ’s preliminary estimate for the number of private property transactions was around 13,300, about 35 per cent of last year’s 38,100 units.

Ms Chua Chor Hoon, senior director of research at DTZ, said that based on her data, this level of activity harks back to 2002, when around 12,000 transactions were recorded. The number of properties then plunged to 10,004 in 2003, when the Severe Acute Respiratory Syndrome epidemic broke out, before recovering the following year.

Chesterton Suntec International research director, Colin Tan was less gloomy about private home prices this year.

“We saw that the prices of private residential units rose in the first two quarters of the year, before coming down in the third quarter due to a change in economic environment,” he said. “Rentals, which are the precursor to prices, have already come down by 15 to 25 per cent, and we might just see prices for this year decline by a maximum of 15 per cent.”

Mr Nicholas Mak, director of research and consultancy of Knight Frank, expects a “single-digit fall” for private homes this year, thanks to the rise in prices in the first two quarters.

Mr Mak thinks that price changes for the whole year could range between zero and -3 per cent.

He also noted that these estimates may differ from analyst to analyst because of different methods used.

Flash estimates for fourth-quarter prices are due to be released by the URA on Jan 2. Prices rose 31.2 per cent in the whole of last year.

DTZ also said that rentals continued to head southwards in the fourth quarter as more expatriates are being repatriated. It said average monthly rents of prime non-landed homes fell 9.2 per cent year on year.

In contrast, rentals of those properties outside prime districts saw an increase of 2 per cent year on year. DTZ said smaller housing budgets are causing tenants to move to the suburbs or downgrade to smaller units upon lease expiry.

Looking ahead, DTZ executive director Ong Choon Fah said the market will continue to “reflect the challenging environment” and only real home occupiers will enter the market. She expects investors to stay out of the market for the next 6 to 12 months and also expects the prices to trend downwards.

Mr Mak expects a drop of 10 to20 per cent for private property prices next year if economic conditions do not improve.

He said: “When the job markets are hit, we expect … the purchasing power of homebuyers will decline.

“The banks will be more stringent in granting loans and all these lead to weaker housing demand, and from this we can expect prices to drop further.”

Source : Today - 30 Dec 2008