WITH sentiment in the mid- to mass-property market improving, the focus is now shifting to mid- and high-end projects, said Merrill Lynch in a report.
Developers, riding on the renewed interest, “will be looking to move up the market and start launching their mid- to high-end projects which have been previously held off”, the report said.
For the potential upcoming launches, Merrill estimated that more than half, or about 3,900 units, will be in the core central region, which includes areas such as River Valley, Newton and Holland district.
While property prices will trend upwards in the near term because of healthy transaction volumes, it cautioned that prices will peak and head south after next year due to excessive supply of properties.
Merrill is forecasting a sharp 20-per-cent recovery in the residential market and it could occur in the third and fourth quarter of this year.
“Given the aggressive new launches by developers hoping to catch the rebound in the market, we believe that the issue of excess supply will limit further pricing upside post-2010,” it said.
“Currently, we are expecting more than 12,000 and 14,000 units due for completion in 2011 and 2012 respectively.”
However, some analysts say that while the scenario is possible, it is too premature to say that prices will be on a downward trend after next year.
Mrs Ong Choon Fah, head of consulting at DTZ Debenham Tie Leung, said: “The market is very dynamic and based on our past research, developers will adjust and schedule their projects according to market conditions. If the pricing is not right, they will be less likely to push out their launches.” She added that demand for housing will also adjust accordingly to how the economy is faring.
If the economy picks up, the leasing market, which is mainly driven by expatriates and permanent residents, will also improve and that could increase the demand for property from investors, said Mrs Ong.
While saying that the scenario of a supply pressure is plausible, Knight Frank’s director of research and consultancy, Mr Nicholas Mak, feels that there are other issues that could cause a downtrend in prices.
He explained that because the economy moves in a cycle, even when it is on an upswing, there will come a point when the pace of improvement in the economy will slow down. When this happens, demand for property will also be affected, thus bringing down prices of residential units, Mr Mak said.
Source : Today – 10 Jun 2009