Private home prices ease after 4 years

Source : Business Times - 3 Oct 2008

Strength in HDB resale prices in Q3 anchors market overall while private residential prices dip 1.8%, flash estimates show

THIRD-quarter private property prices fell for the first time after 17 straight quarters of growth.

And with financial and economic headwinds working their way through, market watchers reckon this could be the start of further price falls ahead.

Urban Redevelopment Authority flash estimates for July to September released yesterday show the private residential property price index dipped 1.8 per cent from Q2.

But strength in the public housing resale market is supporting the property sector overall. The Housing and Development Board resale flat index advanced an estimated 4.2 per cent in Q3 from Q2, exceeding its previous peak in 1996.

The 1.8 per cent fall in private home prices was largely driven by declines in the Core Central and Rest of Central regions. Prices of non-landed private housing in these areas slid 2 per cent and 2.1 per cent respectively. Holding up, with support from HDB upgraders, were prices in the Outside Central Region (OCR), which edged up 0.1 per cent in Q3.

The fall in private property prices comes as no surprise to Knight Frank’s director of consultancy and research Nicholas Mak. ‘US financial problems and the global economic slowdown already weighed down investment sentiment and caused the local transaction volume of private homes to diminish since H2 2007,’ he said. ‘As (these) problems persisted, it was only a matter of time before overall private home prices started to fall as well.’

DTZ’s senior director of research Chua Chor Hoon also anticipated the slide. But she noted that ‘the index has not fallen significantly because many developers are still holding firm on prices for their projects’.

URA’s private residential property price index rose just 0.2 per cent in Q2 2008. Taking the Q3 estimate into account, prices have increased 2.1 per cent this year.

But there is unlikely to be any let-up in price pressure, according to market watchers. ‘Prices, which are now under tremendous pressure, are likely to decline again in Q4,’ said CB Richard Ellis’ executive director Li Hiaw Ho.

Reflecting this sentiment, Knight Frank’s Mr Mak said: ‘Whatever price gain was achieved in the first half of this year will be given up in H2, resulting in flat prices for the whole of 2008.’

With worldwide financial turmoil eating into Singapore’s GDP growth prospects and threatening job losses, Citi has projected respective price falls of 25 and 15 per cent in the high-end and mid-tier private residential housing over the next six to 18 months.

Even the OCR is unlikely to be immune. ‘While it has been performing better, prices in that area will also drop if the economic slowdown continues,’ said DTZ’s Ms Chua.

Explaining how the HDB resale market performed so strongly in Q3, ERA Asia Pacific’s assistant vice-president Eugene Lim said there was robust demand from upgraders, downgraders and permanent residents.

Including the Q3 estimates, the HDB resale price index has jumped 12.4 per cent this year. And the rise will now probably be ‘in the region of 15 per cent for the whole year’, said Propnex CEO Mohd Ismail.

ERA’s Mr Lim said the HDB resale market could see an overall price increase of 15-17 per cent in 2008. But he noted that Q3’s estimated 4.2 per cent increase in the resale price index was a shade lower than the 4.5 per cent in Q2. ‘(This) may be a sign that prices have begun to moderate,’ he said.