A sign of the times

Private property prices register steepest drop since 1975

IN ORDINARY times, a near 14-per-cent drop in private property prices — the steepest ever since official data were first collected in 1975 — would have raised eyebrows all around.

But since we are now living in extraordinary times, the latest Urban Redevelopment Authority’s flash estimate that private property prices were down 13.8 per cent in the first three months of this year did not come as a complete surprise to some analysts. This followed a 6.1 per cent drop in the fourth quarter of last year.

Jones Lang LaSalle’s south-east Asian head of research, Mr Chua Yang Liang, said the fall was “not unexpected” and reflected similar in-house estimates. “The market has been correcting for the last few quarters and we’ve heard all the negative news for the couple of months before that,” he said.

Ms Tay Huey Ying, Colliers International’s Director for Research and Advisory, added: “The slowing to almost a trickle of the primary sale market in the last quarter of 2008 and January 2009 — amid deteriorating global macro-economic conditions, credit and job markets — was probably the trigger for this drastic price fall.”

On a geographical basis, the Rest of Central Region — where upper-mid-tier projects are located — registered the steepest drop of 17.2 per cent, surpassing the 15.2-per-cent drop in Core Central Region for the first time since prices started falling from the third quarter of last year. The latter comprises prime projects in District 9, 10, 11 and Sentosa.

Prices fell 7.5 per cent across other parts of the island, or Outside Central Region (OCR), where “mass-market” projects are typically located.

Knight Frank’s director of research and consultancy Nicholas Mak said the drastic falls in the first two categories were in part due to strong price growth over the past three years to levels that were not sustainable in the present market.

The more resilient showing in the OCR is due to the fact that genuine upgraders will still bite at mass-market projects even during bad times, said Collier’s Ms Tay, pointing to the recent brisk sales of projects like The Caspian and Double Bay Residences.

Still, given how the downward quantum has spread outwards, will the downward pressure on prices eventually hit the suburban projects, regarded as the most resilient during market downturns?

ERA’s Asia Pacific associate director Eugene Lim said that is possible if the interest in such projects is not sustained. “It boils down to how long we take to get out of this (economic) mess. We believe the optimism will gradually die down if it drags on.”

But Mr Chris Koh, Dennis Wee Group’s vice-president, said there is a threshold as to how far prices can go down. Noting that some private projects are advertised from as low as $450,000, anything beyond that would “go against all fundamentals”, as that would match prices of five-room HDB flats and executive condominiums.

On the whole, most analysts believe that the plunge will be less steep going forward. “We will see a slowdown in the curve as we reach downwards but have we reached bottom? Not yet,” said Mr Koh.

Ms Tay estimates that the rate of decline will taper off to 8 per cent in the second quarter before reaching a range of 3 to5 per cent of each of the subsequent quarters. She expects property prices to fall 25 to 30 per cent for the whole of this year.

Source: Today, 2 Apr 2009