Singapore Private Home Prices may have peaked

According to Straits Times: Singapore Private home prices may have peaked .
URA estimates show mere 0.4% rise between April and June, the lowest growth in 4 years
By Fiona Chan, Property Reporter

GROWTH in private home prices ground to a halt in the second quarter, dragged down by dismal market sentiment and a poor showing in the luxury segment.But things were cheerier among cheaper homes, with prices of suburban condominiums and HDB resale flats continuing to climb.

Private home prices inched up 0.4 per cent between April and last month, according to flash estimates from the Urban Redevelopment Authority (URA) yesterday.

This is the smallest rise in about four years and a stark drop from the 3.7 per cent rise recorded in the first three months of the year.

On the supply side, there were 67,700 private residential units as at the first quarter, of which 56,500 are expected to be completed between this year and 2011. Some 42,700 units, or 63 per cent, in the pipeline are unsold.

Experts were divided on whether the market has peaked. While home sales have been in the doldrums since late last year, recent launches - at lowered prices - have been encouraging.

Some consultancies, like DTZ Debenham Tie Leung, predicted that private home prices are ’set for further corrections’ with bigger developers likely to follow in the footsteps of smaller ones and cut prices to move sales.

Prices will come under pressure from two other factors - speculators dumping units and more homes coming on the market as construction ends, DTZ added.

Its analysis of selected projects showed that prime freehold flats actually fell in price by 4.7 per cent in the second quarter while values of suburban and landed homes were unchanged.

Ms Chua Chor Hoon, DTZ’s senior director of research, said: ‘This is just the beginning of a decline. Prime properties have started to come down and while the mass market is still holding, we’re no longer seeing increases.’

URA data showed that condos in the prime central region led the slowdown in the second quarter, with prices creeping up just 0.2 per cent. City-fringe home prices rose 0.7 per cent while those of suburban condos increased by 1.3 per cent.

The star performer was the HDB resale market, where prices climbed 4.4 per cent - more than the 3.7 per cent growth in the first quarter. Mr Colin Tan, head of research and consultancy at Chesterton International, said the demand for HDB flats was likely boosted by too-high prices of private homes.

But the private home market ‘has probably peaked and prices will come down, if not in the next month, then in the following months’, he added.

Mr Nicholas Mak, Knight Frank’s director of research and consultancy, added: ‘If sales volumes don’t pick up much and if the United States posts very weak economic growth, we could see a price decline by December.’

But other consultants painted a brighter picture. CBRE Research executive director Li Hiaw Ho noted that 1,200 to 1,400 new homes were sold between April and last month, almost double the 762 sold between January and March.

Most of the projects that sold well were mid-tier or mass market condos, with average prices between $775 per sq ft (psf) and $1,225 psf, he said.

‘Despite prices softening a little, volume has improved in the last four weeks and this might encourage more developers to launch products.’ This could boost transactions in the next two quarters, which may lead to a strengthening of prices, Mr Li added.

Dr Chua Yang Liang, Jones Lang LaSalle’s head of South-east Asia research, was more cautious.

‘Demand remains favourable in the suburbs, thanks to strong economic growth and a rise in average wages in the first quarter,’ he said. But the market is expected to ‘continue to swing from month to month till we see a clear stability in either volume or price level’.

Source : Straits Times - 02 July 2008

A serious issue that has risen together with the sub-prime issue: escalating oil prices.. serve to be the ONE TRUMP card that will devastate world economies..

An IEA report released at a conference confirmed what most consumers fear: that supplies of oil will remain tight, whether for cooking fires in the poorest countries or powering cars and cooling or heating homes in the richest. And that's despite record prices and reduced demand as costly crude dampens the world's oil hunger. And at one point, sweet crude rose to $143.33.. a barrel. However this time, the worry is: there seems to be no quick fix to this problem.

What this means is that, oil prices, together with other commodities and basic materials, will remain high. This would directly increase production cost for most manufacturing companies. The impact would also be felt by consumers and they would try to look for substitutes. The critical point to consider is how to manage all these rising costs and yet have reasonable amount of growth. For Singapore, the external factor remains the US. On its own, the economic foundations remain sound. There is evidence of wealth creation in the past 3 years. Salaries are increasing although there is inflation problem to worry about. The pent-up demand due to 2006, together with the tight supply and higher valuation leads necessarily to higher HDB prices, which remains behind that of private property. Condominium prices are holding steady at this current stage. A buoyant HDB Resale market is good for developers who are targeting HDB upgraders as their primary target market. So, unless the US derails, property prices should still see an upward climb.

Economists continue to worry that higher prices will stifle growth. Lehman Brothers economist Michele Meyer said she expects higher prices to push the manufacturing reading below its break-even level next month. And if the oil price continues its upward climb to $150 a barrel, there will be trouble.. it will definitely impact growth.

So for those who wants to know what's "the ground feeling" like in the US.. REFER..