Rents, prices in central, prime areas may drop

July 18, 2008
Rents, prices in central, prime areas may drop
JLL predicts up to 4.5% dip in typical prime district rents
By EMILYN YAP

RENTS and resale prices of housing in the central and prime districts
could be hit this year and next depending on the crunch in the US
market, says Jones Lang LaSalle (JLL).

In the worst case scenario, the real estate consultancy firm projects
a 3.5 to 4.5 per cent drop in rents in the typical prime districts by
year-end. 'Compared to recent rental rises, this remains a relatively
small decline,' said JLL's managing director in South-east Asia and
Singapore, Chris Fossick. The central districts could experience a
bigger 5 to 7 per cent drop in rents in 2009.

The anticipated completion of some 15,000 units between 2008 and 2009
is likely to cause rents to ease, as new islandwide supply is likely
to surpass the average 10-year take up of 6,600-6,800 units, JLL said
in a statement yesterday. Most completed supply could appear in the
central districts.

Average resale prices in the central districts could ease about one
per cent by 2009, while prices in the luxury prime districts could
dive 11-13 per cent.

Mr Fossick referred to the forecasts as 'more of a worst-case
scenario' should the US market not pick up soon. He said that
sentiment will improve once US housing shows signs of recovery.
Singapore's fundamentals are attractive to investors and demand will
return when uncertainty clears, he added.

Investors might then realise that 'there is less supply now than we
thought there was' - and prices may rise again.

Taking a medium to longer-term view, Mr Fossick said: 'We are seeing
a dramatic fall in potential future supply in Singapore due to a
stall in collective sales.'

JLL said that there were only two transactions worth $55.3 million in
the first half of this year, compared with 51 deals worth $9.33
billion in the same period last year.

Mr Fossick said that there is also less supply from the confirmed
list of the Government Land Sales Programme for the second half of
the year.

Prime districts are already seeing slightly weaker rents as
expatriates with lower housing budgets move to non-prime areas. JLL
data showed that in the first half of the year, luxury prime rents
fell one per cent and typical prime rents dropped 2 per cent.

Properties in the central districts in turn became more popular for
leasing. Average rents there rose 11 per cent and surpassed those of
typical prime properties for the first time in H1 this year.

JLL data also showed average resale prices softening in some areas.
Luxury prime property prices eased 4.9 per cent to $2,595 per square
foot (psf) in the first half of the year, while central district
prices eased 0.5 per cent to $1,020 psf.

The shift of rental demand from the prime to central districts has
sustained investor interest in central district property, according
to JLL.

The mass market stood out with 3 per cent growth in resale prices to
around $690 psf in H1, and JLL projected that prices could stay at
this level in 2009.