reporter2
26-12-14, 13:45
http://www.straitstimes.com/archive/saturday/premium/money/story/10-fall-home-prices-global-uncertainties-ahead-20141220
INVEST
'10% fall in home prices, global uncertainties ahead'
Analyst tips 2015 growth for S'pore to be below 3%
Published on Dec 20, 2014 12:45 AM
By Wong Wei Han
HOME prices here may slide another 10 per cent next year, while Singapore's exports face decidedly mixed prospects, a leading analyst has said.
JP Morgan's head of emerging Asia economic research, Mr Jahangir Aziz, said the key export market of the United States was recovering, but that another important market, Europe, was still looking very shaky.
On the property front at home, Mr Aziz said in an interview with The Straits Times that significant fresh supply will weigh on the market next year.
"Since 2010, there has been a coordinated massive increase in supply taking place, especially in the private housing market. This has brought down housing and rental prices, a trend that we think will continue into 2015, when the increased supply fully hits the market," he said.
"We're probably looking at another 10 per cent drop through next year. The price value of assets will decline as a result, which is a negative for consumption."
This may partly offset the potential benefits local households enjoy as oil prices continue to slump. JP Morgan expects local petrol prices to drop at a rate of about half the oil price decline rate, with a one- to two-month lag. For instance, a 30 per cent slide in crude oil prices would translate into roughly a 15 per cent fall in pump prices here.
Singapore's outlook also depends on the recovery in the US and Europe, which, as yet, remains a very mixed picture.
"We expect the US to grow by 2.5 to 3 per cent in 2015, up from this year's 1.5 per cent. Investment will improve as the US completes its fiscal consolidation; oil price decline will also encourage consumption and improve corporate margins," Mr Aziz said.
But he added that Europe faces many uncertainties.
"Structural problems in fiscal policies remain, and necessary labour market reforms have been much slower than the economy requires. We will likely see only small pockets of growth for quite some time," said Mr Aziz.
Against this backdrop, Singapore's growth next year should come in below 3 per cent, he believes. This is towards the lower end of the Government's 2 per cent to 4 per cent forecast.
Mr Aziz's pessimism is partly based on persistently weak demand for Singapore's exports, which account for around one-third of the economy.
Non-oil domestic exports to the US and the European Union fell last month, while total shipments gained a slight 1.6 per cent year on year after October's 1.5 per cent drop, data from trade agency IE Singapore showed.
"For our exports to really grow, US corporate spending on high-end equipment needs to really pick up, because that's where the value-add to Singapore is. That has yet to happen despite the slow recovery there," said Mr Aziz, in the interview this week.
But even after accounting for all the uncertainties, Singapore's economy is not in too bad a shape, he stressed.
"What is not being appreciated is that global growth has fallen massively since the global financial crisis, from around 4 per cent previously to hardly reaching 2 per cent now. That is a massive negative shock for an open economy and exporter like Singapore… I don't think the Monetary Authority of Singapore is going to be unhappy about these sorts of growth rates."
[email protected]
INVEST
'10% fall in home prices, global uncertainties ahead'
Analyst tips 2015 growth for S'pore to be below 3%
Published on Dec 20, 2014 12:45 AM
By Wong Wei Han
HOME prices here may slide another 10 per cent next year, while Singapore's exports face decidedly mixed prospects, a leading analyst has said.
JP Morgan's head of emerging Asia economic research, Mr Jahangir Aziz, said the key export market of the United States was recovering, but that another important market, Europe, was still looking very shaky.
On the property front at home, Mr Aziz said in an interview with The Straits Times that significant fresh supply will weigh on the market next year.
"Since 2010, there has been a coordinated massive increase in supply taking place, especially in the private housing market. This has brought down housing and rental prices, a trend that we think will continue into 2015, when the increased supply fully hits the market," he said.
"We're probably looking at another 10 per cent drop through next year. The price value of assets will decline as a result, which is a negative for consumption."
This may partly offset the potential benefits local households enjoy as oil prices continue to slump. JP Morgan expects local petrol prices to drop at a rate of about half the oil price decline rate, with a one- to two-month lag. For instance, a 30 per cent slide in crude oil prices would translate into roughly a 15 per cent fall in pump prices here.
Singapore's outlook also depends on the recovery in the US and Europe, which, as yet, remains a very mixed picture.
"We expect the US to grow by 2.5 to 3 per cent in 2015, up from this year's 1.5 per cent. Investment will improve as the US completes its fiscal consolidation; oil price decline will also encourage consumption and improve corporate margins," Mr Aziz said.
But he added that Europe faces many uncertainties.
"Structural problems in fiscal policies remain, and necessary labour market reforms have been much slower than the economy requires. We will likely see only small pockets of growth for quite some time," said Mr Aziz.
Against this backdrop, Singapore's growth next year should come in below 3 per cent, he believes. This is towards the lower end of the Government's 2 per cent to 4 per cent forecast.
Mr Aziz's pessimism is partly based on persistently weak demand for Singapore's exports, which account for around one-third of the economy.
Non-oil domestic exports to the US and the European Union fell last month, while total shipments gained a slight 1.6 per cent year on year after October's 1.5 per cent drop, data from trade agency IE Singapore showed.
"For our exports to really grow, US corporate spending on high-end equipment needs to really pick up, because that's where the value-add to Singapore is. That has yet to happen despite the slow recovery there," said Mr Aziz, in the interview this week.
But even after accounting for all the uncertainties, Singapore's economy is not in too bad a shape, he stressed.
"What is not being appreciated is that global growth has fallen massively since the global financial crisis, from around 4 per cent previously to hardly reaching 2 per cent now. That is a massive negative shock for an open economy and exporter like Singapore… I don't think the Monetary Authority of Singapore is going to be unhappy about these sorts of growth rates."
[email protected]