Industrial property prices expected to rise in Q3

The Urban Redevelopment Authority’s (URA) Price Index for industrial properties is expected to register an increase of about eight per cent in the third quarter.

This is according to analysts ahead of flash estimates to be released by the URA on Monday.

While price increases are set to moderate, there are concerns that the uptrend in industrial property prices may spur policy changes to cool the market.

Launched last year, the light industrial development M38 near Bishan is now three quarters sold.

But its sales transactions have yet to fully add weight to the URA price index in industrial property prices.

Savills Singapore’s head of research Alan Cheong, said: “Increasingly last year, the URA price index did not quite capture a lot of these caveats logged for new development projects. But now, they are beginning to populate the basket. And come the fourth quarter, much of this populating of the basket for the index would have been filled up by these new age industrial buildings.”

Savills Singapore estimates that the URA price index for industrial property in the third quarter will rise by 8.9 per cent from the second quarter, after increasing by 8.3 per cent over the first quarter this year.

The rate of increase is then likely to cool off.

In the fourth quarter this year, industrial property prices should increase by 5.1 per cent compared to the third quarter this year.

It is expected to increase by 2.5 per cent in the first quarter next year.

Some analysts are concerned about a potential bubble forming from such high rates of price increase.

GSK Global’s chief executive officer Eric Tan said: “Locally we are facing some economic slowdown and internationally, the US is easing their liquidity. And that will flow into the region and increase the asset prices. It may lead to another bubble in our industrial property.”

SLP International’s head of research Nicholas Mak, said: “I think the level of speculation is relatively higher than previous property boom of 2006 and 2007. One of the reasons is that there are now a lot more single users, strata-titled units trading in the market.”

With such high prices, analysts said industrial property developers are afraid of policy risks but are confident of demand especially from business owners who want to contain rental costs that have gone up by some 30 per cent to 40 per cent in the last few years.

Analysts said retail investors who want to protect their capital from inflation and low interest rates will also continue to drive demand.

Source : Channel NewsAsia – 27 Sep 2012

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