Sharp fall in property prices unlikely

Source : Straits Times - 26 Aug 2008

But there are more people keen to sell than buy now, says DTZ study

SINGAPORE’S property market presents plenty of buying opportunities for institutional investors now that it has cooled somewhat, according to a study by property firm DTZ Debenham Tie Leung.

But buyers waiting for a major price correction will be disappointed.

While the growth in prices may slow, there is unlikely to be a significant fall in property prices here, said Mr John Stinson, DTZ’s regional director of sales and investments for Asia-Pacific’s capital markets.

‘Singapore hasn’t had a long boom, unlike some other countries… I don’t think there will be a repricing,’ he told reporters yesterday at a briefing on Money Into Property, DTZ’s latest research report about investing in Asia-Pacific property.

The report is directed at institutional property investors, who can have a significant impact on the property market, given that they buy and sell large numbers of properties.

Mr Stinson also said the Government’s measures to boost Singapore’s population could prop up demand for property and support prices.

So far, no recent transactions by institutional investors have reflected a repricing in the market, added Mr Shaun Poh, DTZ’s senior director for investment advisory services and auctions.

‘Sellers here have become more realistic and lowered their expectations,’ he added.

But because their expectations were so high previously, this has not necessarily led to lower transacted prices, he said.

What it has actually resulted in is more investors coming back to look at properties that may have previously been overpriced but are now open to negotiation, Mr Poh said.

Currently, there are many more people interested in selling Singapore properties than in buying them, DTZ’s study showed.

It polled investors and found that 12 per cent of them intend to sell their properties in Singapore soon, while fewer than 5 per cent plan to buy properties here.

This is creating a situation quite different from the one last year, when there was no lack of demand for properties but very few available for sale.

Now, growth funds and some opportunistic investors are pulling out of the plateauing Singapore market, at a time when owners - including banks, foreign firms and opportunistic funds - are becoming more willing to sell.

‘There is an increasing number of buying opportunities in gateway markets such as Singapore, Hong Kong and Tokyo,’ said Mr Stinson.

‘Six months ago, it wasn’t about whether you wanted to buy property, but whether you were lucky enough to win the race.’

Interest in Singapore properties remains high, however, especially in the logistics and industrial market. This sector still offers a ‘decent return’ as growth has not been as rapid as in other sectors, said Mr Poh.

Commercial assets in Singapore are also in demand to some extent, but the residential sector is likely to turn in a weak performance in the investment market this year, DTZ said in its report.

‘Given the cautious economic outlook, investor focus for the rest of the year would be on occupier fundamentals in the commercial and industrial sectors,’ it added.

These fundamentals include, for example, the quality of the buildings and their tenants.

While repricing is not an apparent risk in Singapore’s property market, the Asia-Pacific region is facing an average repricing of 25 to 100 basis points, or 0.25 per cent to 1 per cent, Mr Stinson said.

The markets that will be the worst hit include Japan, Australia and New Zealand.