Real Estate Sentiment Index shows property market likely to worsen

Source : Straits Times – 30 Jul 2010

A NEW index tracking the property market shows that developers and other industry players remain positive but believe conditions will cool down from the bullish levels seen in recent months.

More developers also believe the slowing global economy and an increased supply of new development land may hit market sentiment over the next six months.

The Real Estate Sentiment Index, which was launched at a seminar yesterday, also points to rising interest rates and an excessive supply of new property launches as market risks. The index has been jointly developed by the Real Estate Developers Association of Singapore (Redas) and the department of real estate at the National University of Singapore (NUS). It is based on data collected in a quarterly survey of Redas members to get a snapshot of market sentiment. The poll started in the first quarter.

The reading for the second quarter stood at 5.9, down from 6.8 in the first quarter. This shows that while industry players are still positive, they expect market conditions to worsen.

With empirical data, it is always about the past, said Dr Yu Shi Ming, head of NUS’ department of real estate.

‘With the index, we hope that as soon as a policy is announced, we can get a sense of how the industry feels,’ he said.

Redas chief executive Steven Choo said that apart from its members, policymakers, banks and other firms may find it useful.

There have been about 70 respondents for the survey each quarter – about 60 per cent are developers and the rest consultants and other industry figures.

About 51 per cent of developers polled for the second quarter expect prices of new launches to rise, compared with 85 per cent in the first quarter. About 68 per cent expect more new units to be launched over the next six months, compared with 83 per cent in the first quarter.

About half of the developers polled feel the level of interest for public and private development land will remain unchanged in the near term. Developers are most concerned with rising land prices, followed by the cost of building materials and labour.

At Redas’ seminar yesterday, Rider Levett Bucknall’s managing partner, Mr Winston Hauw, said: ‘It’s good to tender this year as there’s more uncertainty next year. We think prices will go up slightly next year.’