Dismal home sales stats not seen since ‘98

THE comparison rings with foreboding the last time private home prices took a bigger dive than this, it was exactly a decade ago, in the midst of the Asian financial crisis.

In the last three months of 2008, the private resident property price index dropped 5.7 per cent, more than double the rate of decrease a quarter ago, according to flash estimates. The final tally due for unveiling in four weeks’ time which would include dismal sales data from the last two weeks of December could be even more depressing.

And in the year ahead, with the worst yet to come for the economy, analysts are warning that prices could decline by 10 per cent at best, and more than 25 per cent at worst.

For some private home-owners, this brings back dark echoes of 1998, when prices tumbled by one-third.

The biggest plunge of 13.2 per cent came in the third quarter, followed by a 8.7 per cent slide before prices finally rebounded.

Already, the last three months’ drop in private residential property prices is more than what some analysts had expected, which was a 3- to 4-per-cent dip. But does this herald a repeat or worse of the market’s performance in 1998?

Property experts Today spoke to would not commit to saying so, but it was clear the usually upbeat lot was taking a subdued view of the future.

“This (current drop) could mean that there’s some sort of breakthrough,” said Chesterton Suntec International research director Colin Tan.

“There has been a stalemate all this time in the market, but we can tell for certain that the prices are coming down now.”

Investors vs buyers: Who will out wait the other?

Overall, prices of private homes dipped a modest4.3 per cent year on year. How far prices will come down this year would depend on property investors rather than developers, said analysts.

Unlike 10 years ago, when developers were giving discounts on their surplus properties, this time it is individuals who bought during the “unusual” property boom in recent times who are now setting the prices.

In the current climate, it’s often about how long they can hold on to their properties before selling it at a loss, or whether they can hold out for the next upswing. Indeed, the last quarter’s decline in prices could be due to the “overly-invested” looking to raise quick cash or make a quick exit, said ERA Asia Pacific’s associate director Eugene Lim.

For now, those investors with enough fortitude are holding out for as long as they can.

“Sellers are not willing to let go at fire sale prices. And a lot of agents are optimistic that things will pick up; the overall feeling is better than in the last financial crisis,” said property agent Angeline Chong, 35.

But, by and large, buyers have the definite upper hand. Most, especially in the high-end segment, says Mr Lim, are waiting in anticipation of price decreases, and astute ones are shopping around for value buys.

Agent Peter Yu, 40, who has seen the ups and downs of the market since 1988, said: “1997 was a crazy time, and so was last year, but people are still buying … It’s all about price, it’s a buyer’s market.”
Developers have muscle to hold on

Meanwhile, developers are likely to hold off new property launches for now, and focus on clearing unsold units in currently marketed projects.

According to CB Richard Ellis, six major mass-market projects launched this year had sold just20 to 46 per cent of units as of end-2008.

This year and the next will also see more than 7,000 units bought under the Deferred Payment Scheme completed. With the financial crunch and banks tightening credit lines, it is a question of how many may be returned to developers should buyers fail to find the needed financing.

Still, price cuts by developers are unlikely as “many of them have done well over the last two years” and have the financial muscle to wait out the downturn, said ERA’s Mr Lim.

The one segment that has seen the greatest dive in prices last year: Luxury homes.

According to CBRE, new projects under construction in districts 9 and 10 saw a 30- to 35-per-cent fall in prices; those in the much touted Sentosa Cove and Marina Bay experienced a 10- to 13-per-cent dip.

But overall, adds CBRE: “The fall in prices may encourage sales and push take-up volume to 5,000 to 6,000 units for the entire year.”

Source : Today – 3 Jan 2009

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