Investors have been cautious about the property sector amid expectations that the muted residential property market will weaken further.
But some property consultants are taking a slightly more positive stance, saying that this situation is temporary.
Transaction volumes for private homes have been thin with developers holding back launches or cutting prices. And there’s been a recent slew of bearish reports from the likes of JP Morgan and Nomura, which are further dampening sentiment.
They said that private home prices could drop by as much as 35 per cent in the upper-end segments of private residential property prices by 2010, due to excess supply and poor sentiment.
Some also said the middle and low-end segments won’t be spared.
But there are some property consultants who said that while things are slow now, dynamics will change going forward.
Some analysts said that luxury homes may cost 35 per cent less by 2010 as prices are already falling.
They argue that marginal speculative sellers are likely to drive prices lower amid low transaction volumes and higher unsold pre-sale inventories.
Lower rental expectations and a large increase in supply are also seen compounding the situation in the longer term.
While the consensus view is that prices will continue to remain under pressure for the rest of the year and into 2009, other consultants also said that the main reasons for falling prices are external.
Chua Chor Hoon, Senior Director, Research, DTZ Debenham Tie Leung, said: “It’s mainly the external factor because of what’s happening in US so sentiments are really weak now. Partly because prices have gone up quite a lot last year especially after the deferred payment scheme has been removed that made buyers more cautious. It’s a combination of factors but I believe it’s the US economy that has a greater impact.”
She believes that prices will continue falling for the rest of this year and even into the year ahead, but a glimmer of hope exists.
She said:”Prices are likely to fall for the rest of this year and they could continue to fall next year depending on how the US economy pans out. But we have a lot of good things coming up in 2010, Youth Olympics, integrated resorts. So our fundamentals are quite strong. When the US economy picks up, I believe sentiments will follow suit.”
And some point out that the bearish reports are due to an over-estimation of supply numbers.
Ku Swee Yong, Director, Marketing & Business Development, Savills (Singapore), said: “The differences arose because of variance in the interpretation of a very basic set of data – the supply numbers – how many apartments will be completed in next three years. We believe that the supply numbers have been overstated because there have been many projects filed and we know that these projects have been delayed.”
What’s clear though is that shares in property developers have been taking a hit amid concerns over the sector outlook. They were mostly lower on Thursday, with both Keppel Land and CapitaLand closing in the red. – CNA/vm
Source : Channel NewsAsia – 28 May 2008
