First signs of housing market slowdown

AFTER property fever hit euphoric levels last year, flash estimates from the Housing and Development Board and the Urban Redevelopment Authority (URA) show the growth in real estate is slowing down significantly.

The index for the private home market showed prices rose 4.2 per cent in the first three month, down from the last quarter’s 6.8 per cent growth.

And looking ahead, some property watchers are taking a more subdued stand – expecting private property prices to inch forward a modest 1 to 2 per cent in the second quarter, and 5 to 10 per cent for the whole of this year. Should the economy contract on the back of a United States recession, home prices could fall for the first time since 2004, said an analyst.

But, PropNex chief executive officer Mohd Ismail, for one, is optimistic. While foreign interest last year buoyed the property market in the downtown and core central region, he said, strong domestic demand is expected to drive growth in the mass market.

He noted how condominiums in outlying estates such as Woodlands and
Jurong East are averaging $550 to $600 per square foot (psf), which is “still very affordable pricing that has moved up marginally from before the boom last year”. He predicted: “The mass market will continue to perform with prices expected to well exceed 10 per cent for 2008.”

He attributed the first quarter’s results to a low volume of transactions, due to many developers holding back property launches and sellers holding on to their properties.

ERA noted that after a fast-paced 2007, the private housing market seems to have come to “some form of standstill”.

“The lower overall price increase indicates that buyers have turned cautious in view of continued concerns about the US economy, sub-prime crisis and the
erratic stock market,” said ERA’s assistant vice-president Eugene Lim.

Knight Frank, which expects the rate of increase of private home prices to remain below 5 per cent in the first three quarters, outlined the most sobering scenario.

“If the economy were to contract in the coming months, home prices would face strong downward pressure and could experience their first decline since first quarter 2004,” said its director of consultancy and research Nicholas Mak.

Flash estimates are compiled based on transaction prices given in caveats lodged in the first ten weeks of the quarter, supplemented by information on the number of new units sold.

More complete statistics will be updated four weeks later and the URA notes, the difference between the flash estimate and actual price changes could be significant when the change is small.
Source : Channel NewsAsia – 1 Apr 2008

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