Sharp fall in property prices unlikely

Aug 26, 2008
Sharp fall in property prices unlikely
But there are more people keen to sell than buy now, says DTZ study
By Fiona Chan, Property Reporter

SINGAPORE'S property market presents plenty of buying opportunities
for institutional investors now that it has cooled somewhat,
according to a study by property firm DTZ Debenham Tie Leung.
But buyers waiting for a major price correction will be disappointed.

While the growth in prices may slow, there is unlikely to be a
significant fall in property prices here, said Mr John Stinson, DTZ's
regional director of sales and investments for Asia-Pacific's capital
markets.

'Singapore hasn't had a long boom, unlike some other countries... I
don't think there will be a repricing,' he told reporters yesterday
at a briefing on Money Into Property, DTZ's latest research report
about investing in Asia-Pacific property.

The report is directed at institutional property investors, who can
have a significant impact on the property market, given that they buy
and sell large numbers of properties.

Mr Stinson also said the Government's measures to boost Singapore's
population could prop up demand for property and support prices.

So far, no recent transactions by institutional investors have
reflected a repricing in the market, added Mr Shaun Poh, DTZ's senior
director for investment advisory services and auctions.

'Sellers here have become more realistic and lowered their
expectations,' he added.

But because their expectations were so high previously, this has not
necessarily led to lower transacted prices, he said.

What it has actually resulted in is more investors coming back to
look at properties that may have previously been overpriced but are
now open to negotiation, Mr Poh said.

Currently, there are many more people interested in selling Singapore
properties than in buying them, DTZ's study showed.

It polled investors and found that 12 per cent of them intend to sell
their properties in Singapore soon, while fewer than 5 per cent plan
to buy properties here.

This is creating a situation quite different from the one last year,
when there was no lack of demand for properties but very few
available for sale.

Now, growth funds and some opportunistic investors are pulling out of
the plateauing Singapore market, at a time when owners - including
banks, foreign firms and opportunistic funds - are becoming more
willing to sell.

'There is an increasing number of buying opportunities in gateway
markets such as Singapore, Hong Kong and Tokyo,' said Mr Stinson.

'Six months ago, it wasn't about whether you wanted to buy property,
but whether you were lucky enough to win the race.'

Interest in Singapore properties remains high, however, especially in
the logistics and industrial market. This sector still offers
a 'decent return' as growth has not been as rapid as in other
sectors, said Mr Poh.

Commercial assets in Singapore are also in demand to some extent, but
the residential sector is likely to turn in a weak performance in the
investment market this year, DTZ said in its report.

'Given the cautious economic outlook, investor focus for the rest of
the year would be on occupier fundamentals in the commercial and
industrial sectors,' it added.

These fundamentals include, for example, the quality of the buildings
and their tenants.

While repricing is not an apparent risk in Singapore's property
market, the Asia-Pacific region is facing an average repricing of 25
to 100 basis points, or 0.25 per cent to 1 per cent, Mr Stinson said.

The markets that will be the worst hit include Japan, Australia and
New Zealand.