Sharp drop in growth of private home prices

July 26, 2008
Sharp drop in growth of private home prices
HDB resale flats, however, do well, strengthening in value
By Fiona Chan, Property Reporter

Prices peaked and rental growth braked sharply between April and
June, with property consultants forecasting the beginning of a
decline.

But Housing Board resale flats defied the trend and continued to
strengthen in value as sales grew amid strong demand for cheaper
homes.

Private home prices inched up just 0.17 per cent in the quarter - the
least in four years and well below the 3.8 per cent in the first
quarter.

The minuscule rise, announced by the Urban Redevelopment Authority
(URA) yesterday, was even below the 0.4 per cent increase the agency
had predicted at the beginning of this month.

This is the first time that the official figure has come in lower
than forecast, 'a strong indication that home prices are finally
softening', said Ms Tay Huey Ying, director of research and
consultancy at Colliers International.

Prices are being dragged down by stubbornly gloomy market sentiment,
stemming from the slowing global economy, high inflation and erratic
stock market, say experts.

Developers have started to price projects more 'realistically' and
individual home sellers are accepting lower offers, leading to an
overall moderation of prices, according to Mr Li Hiaw Ho, executive
director of CBRE Research.

In prime districts, prices of luxury homes dipped for the first time
in four years after a spectacular climb of almost 70 per cent since
2005.

'This is the first fall since the start of the property boom in 2004
and could be the turning point in the price trend,' said Mr Nicholas
Mak, Knight Frank's director of research and consultancy.

City-fringe and suburban homes barely fared better, with prices
rising below 1 per cent in the second quarter.

Growth in home rents also halved in the second quarter to just 2.5
per cent, the lowest in two years. This could be due to fewer
expatriates coming in as well as landlords starting to lower their
asking rentals, said Mr Mak.

CBRE's Mr Li predicts an 'inevitable' correction in prices 'to the
tune of 5 per cent to 10 per cent' in the second half of the year.

But Ms Tay from Colliers believes Singapore's mid-term prospects
remain positive on the back of the two integrated resorts. This
will 'hold prices steady and ensure they do not fall by more than 3
per cent in the third quarter', she said.

Still, caution prevails amid a large chunk of unsold homes waiting in
the pipeline. Developers are sitting on some 12,500 new homes that
are ready for launch, said URA.

Hopeful homebuyer Timothy Gan, 27, was cheered by the news that
prices may fall. 'I'm waiting for their prices to fall so I can get
married,' said the civil servant.

Prices and rentals of offices also grew more slowly in the quarter,
as firms eased pressure on office supply by moving out of the central
areas.

The bright spot is the HDB resale market, where prices keep rising
due to higher valuations and strong demand from upgraders,
downgraders and permanent residents, said Mr Eugene Lim, assistant
vice-president of property agency ERA Asia-Pacific.

Resale deals jumped 22 per cent to 7,760 transactions in the second
quarter, boosted by more sales of bigger flats. A quarter of all
flats sold between April and June were five-room and executive flats,
said Mr Lim.