Should you jump in now?

Source : Today - 18 Dec 2008

JLL says yes; other property pundits not so sure

THANKS in part to falling interest rates, the affordability for luxury homes in Singapore has improved by 24 per cent since the third quarter of last year, according to property consultancy Jones Lang LaSalle (JLL).

JLL compiles an affordability index for private homes, which takes into account factors such as property prices, national wages and interest rates.

Based on the movement of this index in the past year, JLL said during a media briefing yesterday that luxury residential properties have become 24 per cent more affordable since last year, while mass market homes have become 5 per cent more affordable.

Hence, the consultancy sees investment opportunities in the luxury segment.

In addition, resale capital values and rentals of residential properties have come off the highs seen last year, while monthly rental payments have caught up with monthly mortgage payments.

These reasons, according to JLL, coupled with the assessment by the Economist Intelligence Unit that Singapore’s economy will rebound and grow about 2 per cent in 2010, all point to one thing: This is a good time for property investment funds and developers to inject capital into the property market.

Similar investment opportunities exist in the commercial property sector, said JLL’s head of markets in Singapore, Mr Chris Archibold.

“We are very aware that there are issues in the financial market, but they’re not going to be there forever; it’s in the short term,” he said.

“If you look at the supply that is on offer to the banking and finance community and Grade A central business district (CBD) occupiers, currently of the CBD office stock, 78 per cent is less than 15,000 sq ft.

“If you looked at it in 2005, it was 81 per cent. So, we are slowly growing our pure Grade A office supply, and that’s something we feel we need to do, given the fact that we want to maintain and build our position as a financial hub going forward.”

As many financial firms typically need large spaces for trading and dealing floors, the past three years have seen an increasing proportion of Grade A office space being bigger than 15,000 sq ft to cater to such needs.

On the other hand, property consultancy Chesterton Suntec International would hesitate to plunge into the investment property market now.

Its consultancy and research head Colin Tan feels investors should hold back for the time being, until the market bottoms out, corrects itself and reflects the fundamentals.

“Prices and rentals are still pretty high. I think you have to wait for the indices to be really negative. Right now, we’re just past the turning stage, on our way down. We haven’t quite got the worst of it yet,” said Mr Tan.

Although he said now might be a good time for investors to look around, Mr Tan expects few transactions to be concluded in the next year or so, as property prices and rentals have not corrected much.