Home prices still falling, study shows

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January 20, 2009 Tuesday

Home prices still falling, study shows

By Joyce Teo


HOME prices here largely continued to be eroded at the end of last year, according to early indications.

A Knight Frank study of a sampling of property options signed mostly last month showed that the prices of many condominiums fell in a quiet month.

In developments which had registered more than one recent sale, prices fell by 4.6 per cent to 10.9 per cent, it said. However, prices of a few developments remained steady or even rose.

Knight Frank compared individual options of a development with median prices of caveats lodged in the previous three quarters. There may be a time lag for caveats lodged, as lodging a caveat is voluntary, it said.

The consultancy was unable to identify a general trend by locality or wider region as the number of options was limited. Also, the characteristics of a particular unit, such as which floor it is on, can influence prices.

At the 910-unit City Square Residences near Farrer Park MRT station, for instance, prices of recent options signed ranged from lower to largely flat from the third quarter at $789 to $964 per sq ft. While its prices have gradually come down from the second quarter, they were way above the April 2005 soft launch price of $560 psf on average.

Overall, home prices are expected to weaken further in the next three to six months, with a bigger plunge in prices of high-end projects than mass market ones, said Knight Frank director of research and consultancy Nicholas Mak. 'There is a fair bit of latent demand, but these buyers are all waiting to come in at the bottom.'

Individual sellers in the resale market are likely to drop their prices at a faster rate than developers in the primary market, he said.

Home prices will likely continue to fall gradually for a few months, but there is a difference between the previous downturns and this one, said Chesterton Suntec International head of research and consultancy Colin Tan. 'Usually, when prices go down, sales will go up. But now, prices have started to come down, but sales have not improved.'

One possible reason for the low volume is that some investors cannot afford to sell now, said Mr Tan.

If they were to sell low now, they would have to top up their loan in cash, he said, and cash is a scarce commodity in a credit crunch.

The slower the prices come down, the longer the property market recovery will take, said Mr Tan.