Private home prices: First fall in 4-1/2 years

Source : Straits Times - 3 Oct 2008

PRICES of private homes have fallen for the first time in four-and-a-half years, marking an end to the property boom that started in 2004.

And prices are likely to keep falling well into next year, squeezed by continuing financial turbulence and a looming global recession, say property consultants.

At least HDB flat owners have some reason to cheer. Resale prices continued to climb in the third quarter, pushing values to their highest level since 1996.

Official estimates yesterday showed that HDB resale prices rose 4.2 per cent in the July to September period, on top of a 4.5 per cent rise in the previous quarter.

But overall prices of private homes slipped 1.8 per cent in the period, after flattening out in the second quarter. Consultants called it a turning point after almost a year of deadlock between buyers and sellers in which sales all but dried up.

Most had expected the drop, given the financial problems in the United States and global economic slowdown.

‘It was only a matter of time before overall private home prices started to fall as well,’ said Knight Frank’s director of research and consultancy Nicholas Mak.

Homes in the city-fringe areas led the price decline, dropping 2.1 per cent in areas ranging from Queenstown and Bishan to Marine Parade and Sentosa. In the choicest Orchard Road, Holland and Bukit Timah districts, prices fell for the second straight quarter. They dipped 2 per cent, after falling 0.1 per cent in the April to June period. But suburban prices held steady and actually rose slightly by 0.1 per cent in the third quarter, on top of a 0.9 per cent rise in the previous three months.

Despite the overall fall in the third quarter, private home prices have risen about 2 per cent since January. But they could fall 10 per cent over the next 12 months, and even more beyond that, said Mr Mak.

‘Developers may start to offer ’soft discounts’ such as giving vouchers and absorbing stamp duty, and could hold back launches as far as three, four years,’ he added.

While sales will slow in the fourth quarter, ‘there could be some sparks of activity if interesting projects such as Marina Bay Suites, Sentosa Quayside and The Arte on Thomson Road are launched’, said Mr Li Hiaw Ho, executive director of CB Richard Ellis Research.

For the first time since 2006, the Urban Redevelopment Authority did not highlight the number of upcoming private homes in the flash estimates, after concerns that the large headline supply figures did not reflect delayed completions and may further dampen market sentiment.

Housing supply statistics will be released with the full set of third-quarter property data at the end of this month.

But this will be scant comfort for property developers, many of whom saw their shares drop sharply yesterday after analysts downgraded their counters.

Citigroup analyst Wendy Koh predicts that high-end home prices will fall by 25 per cent, the mid-end by 15 per cent and mass market by 5 to 10 per cent.

‘I’m definitely going to wait for prices to fall some more; signs are clear that things are going to get worse before they get better,’ said potential buyer Chris Low, 28, who works in a technology research firm.

The only bright spot is the HDB market, where resale prices have jumped 12 per cent this year and could rack up a 15 per cent rise for the whole year, said Mr Mohamed Ismail, chief executive of property agency PropNex.

‘We can even expect to see this strong demand continuing into next year, mainly because of the time lag to build flats, coupled with stronger demands from PRs due to higher rental costs,’ he added.