Home prices rise more slowly in quiet market

April 26, 2008

Home prices rise more slowly in quiet market

Lower-than-forecast 3.7% growth could signal start of decline

By Fiona Chan

THE property market may have gone quiet, but home prices continued their steady climb in the first three months of this year, albeit at a much weaker pace.

Private home prices rose 3.7 per cent between January and March, down from the 6.8 per cent growth in the previous three months.

It was also notably lower than the 4.2 per cent rise that had been predicted early this month, based on sales in the first 10 weeks.

This suggests prices may have started declining last month, dragging down the whole quarter.

'Price growth is starting to weaken severely and the volume of transactions has halved,' said Mr Chua Yang Liang, Jones Lang LaSalle's head of South-east Asia research.

'The rate of increase in coming quarters is likely to be even slower and prices may peak in the third or fourth quarter.'

Observers have suggested that private home prices could be holding partly because developers are putting off project launches, thus curbing the supply of new homes.

Developers had 10,239 new units ready for sale in the first quarter that were not launched - that is a three-year high and 3,000 more than in the previous quarter.

The number of units actually launched in the quarter - 1,343 - was the lowest in almost four years.

'There's a lot of supply but it hasn't been released into the market yet, and that could be one reason why prices are still growing,' said Mr Nicholas Mak, director of research and consultancy at property firm Knight Frank.

Almost half of these unlaunched units were in the core central region, comprising the prime districts 9 to 11, the Marina Bay area and Sentosa. The rest were evenly divided between the city-fringe and suburban regions.

Mr Ku Swee Yong of Savills Singapore said developers may not be delaying launches to deliberately prop up prices but, rather, to wait out the weak market sentiment and uncertain global outlook.

Whatever the reason, the lack of launches has forced buyers to turn to the secondary market, where they bought 2,304 homes in the quarter - three times what they bought directly from developers.

This shows there is still an underlying demand for homes, and may also have helped sustain prices at current levels, analysts said.

The slowdown affected private homes in all areas, from prime to suburban regions. Each region saw prices rise only 3 to 4 per cent, from 7 to 8 per cent the previous quarter.

Sub-sales - this is when a person buys an uncompleted home and then sells it again before it is built - made up a tenth of all sales.

In the case of public housing, resale prices rose 3.7 per cent in the first quarter, down from 5.7 per cent previously. But sales dropped 6 per cent to 6,360 transactions.

The median cash-over-valuation amount - the portion of a flat's price that buyers have to pay in cash - dipped slightly to $21,000. This shows that buyers are starting to resist having to fork out too much cash for HDB flats, especially since valuations have climbed recently.

All other types of properties also saw lower growth, with office prices logging the biggest slowdown. They rose only 1.1 per cent in the first quarter, down from 8 per cent in the previous three months.

But office rentals stayed strong, as businesses continued to expand and space remained tight.

fiochan@sph.com.sg