Q4 private home price slide is worst in decade

http://www.businesstimes.com.sg/sub/...12536,00.html?

Published January 3, 2009

Q4 private home price slide is worst in decade

Some consultants notice yawning bid-ask gaps leading to distressed transacted prices

By KALPANA RASHIWALA


IN its worst showing since Q4 1998, the official private home price index slid 5.7 per cent in Q4 last year over the preceding quarter. For full-year 2008, the index fell 4.3 per cent, reversing a 31.2 per cent jump in 2007.

Property consultants are predicting a further decline of 10-20 per cent this year in the benchmark index, with upmarket homes continuing to be the worst hit, as in 2008. This sector was the most overheated during the run-up in 2006 and 2007.

'The bid-ask gap is very high; any buyer that comes in now wants to make sure he's buying at very attractive prices to cushion against future risk. As a result, most transacted prices are quite distressed,' said DTZ executive director Ong Choon Fah.

BT understands buyers are looking at prices at least 20 per cent below Q3 2008 levels before they are willing to commit.

URA's non-landed private home price index for Core Central Region (CCR) fell 6.3 per cent quarter-on-quarter in Q4, or a full-year drop of 5.5 per cent. CCR includes the prime districts, financial district and Sentosa Cove. In the Rest of Central Region, the price drop was 5.5 per cent for Q4, and 4 per cent for the full year. Outside Central Region, a proxy for suburban mass-market locations, suffered the smallest declines, of 4.7 per cent in Q4 and 1.6 per cent for the whole year.

The declines in URA's indices were far smaller than the price drops estimated by property consultants. CB Richard Ellis said that last year, average prices of new luxury homes under construction fell 30 to 35 per cent for prime districts 9 and 10, while those in Marina Bay and Sentosa Cove eased 10-13 per cent.

URA's price indices are weighted according to the moving average mix of transactions for the preceding 12 quarters, and this tends to make changes in the indices more muted during sharp market swings.

For this year, JP Morgan analyst Chris Gee said: 'The critical factor that will affect private home prices in 2009 - probably more importantly than the economy and jobs market - will be banks' financing of property. Banks seem happy to lend to the right type of buyers, but they're more conservative on valuations and tighter on loan-to-value.'

As for developers, smaller players have already started to chop prices. 'Among bigger developers, some are restructuring their portfolios and re-evaluating their risk positions,' DTZ's Mrs Ong noted.

A seasoned developer pointed to a diversity of strategies among developers, according to their financial strength, profit margin for each project and their view of when the recovery will take place. 'Some will cut and sell; some will package things that effectively give more discounts; some will lease instead of selling; some will just sit it out and wait for better times.

'Projects will be slowed down or delayed, stretching out the supply coming into the market, which in itself is a regulating mechanism,' he said.

In the public housing segment, the Housing & Development Board's (HDB) resale flat price index still inched up 1.5 per cent quarter-on-quarter in Q4 to scale a new peak. But this was slower than the 4.2 per cent rise posted in Q3.

ERA Asia Pacific associate director Eugene Lim said: 'We've been seeing more transactions with decreasing cash-over-valuations (COVs). The days of transactions with above $50,000 COVs are over.'

He is predicting a sub-1 per cent rise in the HDB resale flat price index for each of Q1 and Q2 this year. 'If the recovery takes longer, we may see the price index flatten in H2 2009 before decreasing, if the situation worsens.'

Knight Frank director Nicholas Mak predicted a 5 to 10 per cent correction in HDB resale flat prices this year, as the weakening economic conditions filter into the HDB market.

ERA's Mr Lim noted that 'in uncertain times, home buyers go for the 'safer' option of HDB flats to ease their financial burden'. He estimated 30,000 to 31,000 HDB resale transactions were done in 2008 - surpassing the 29,436 in 2007.

As for the private housing sector, CBRE predicted developers may sell 5,000-6,000 units in 2009, as falling prices boost take-up. It put the figure for last year at 4,300 to 4,400 units - just 30 per cent of 2007's record volume. Sales also slowed in the secondary market. CBRE estimated about 7,400 to 7,600 resale deals were done last year - against nearly 21,000 transactions in 2007. The 1,600 to 1,650 subsale deals it estimated for 2008 were also a far cry from the 2007's figure of 4,863.

http://www.ura.gov.sg/pr/text/2009/pr09-01.html

http://www.businesstimes.com.sg/mnt/...MAGES_URA3.jpg

http://www.straitstimes.com/Prime%2B...ry_321236.html

January 3, 2009 Saturday

Private homes continue freefall; HDB prices hold up

The fourth quarter's 5.7 per cent drop is the sharpest in a decade

By Jessica Cheam

http://www.straitstimes.com/STI/STIM...03/decline.jpg

THE deepening economic crisis sent private home prices plunging 5.7 per cent in the fourth quarter of 2008 - the steepest drop in a decade.

The dramatic fall has effectively brought an end to Singapore's four-year property rally as prices had already dived 2.4 per cent in the previous quarter as jittery buyers flee the market.

Prices for 2008 overall are down 4.3 per cent compared with 2007, according to flash estimates from the Urban Redevelopment Authority (URA) yesterday.

This is a striking turnaround from the 31.2 per cent spike in private home prices in 2007, the peak of the boom.

But Housing Board (HDB) flats continue to buck the trend, climbing 1.5 per cent in the fourth quarter following a 4.2 per cent increase in the third.

This means HDB resale flat prices have reached a new peak since the 1996 high.

Prices rose 13.9 per cent in 2008, building on the 16.6 per cent increase in 2007.

Analysts say the gloomy economic outlook has turned home-buyers even more cautious, leading to a fall in demand even as developers begin to soften prices of new launches. Potential buyers are waiting on the sidelines in anticipation of further price cuts, said CBRE Research executive director Li Hiaw Ho.

Prices for apartments in the core central area suffered the most - down 6.3 per cent in the three months to Dec 31, while those in the rest of the central area slipped 5.5 per cent. This follows declines of 2.7 per cent and 2.4 per cent respectively in those areas in the third quarter.

But the falls in some prime projects were even more severe. CBRE's Mr Li said the luxury segment has taken a hammering with projects under construction falling 30 to 35 per cent in prime districts 9 and 10, while those in Marina Bay and Sentosa Cove fell 10 to 13 per cent.

The URA's website showed home prices at Ardmore Park, for example, declining around 30 per cent, from an average of almost $3,000 psf in February to March, to around $2,115 psf in December.

Prices of suburban homes fared better. They were down 4.7 per cent in the fourth quarter, following a 1.5 per cent drop in the previous three months.

ERA Asia Pacific associate director Eugene Lim said prices of such homes have already dipped to 'very reasonable levels, due to recent launches where developers were sensitive to the poor economy'.

Mr Lim also felt that the drop in private home prices - the largest since the last quarter of 1998 - proves that 'fire sales' have started as sellers look to bail out and raise cash amid the recession.

Knight Frank's director of research and consultancy, Mr Nicholas Mak, said the decline of median prices of sub-sales - 10.6 per cent in the third quarter and 7.5 per cent in fourth quarter - confirms this theory, based on his firm's analysis.

Take Sentosa's The Azure. The median subsale price in the fourth quarter was $1,200 psf, down from around $1,700 psf in the previous two quarters, said Mr Mak. That means a 1,300 sq ft flat that cost $2.21 million might now go for just $1.56 million.

The URA recently revealed that about 10,450 unfinished homes were sold under deferred payment, which allows buyers to postpone payments until projects are completed. This has raised concerns that such homes are at risk of default or distressed sales if prices fall more.

The URA and HDB flash estimates were based on transactions in the first 10 weeks of the fourth quarter. They will be updated in four weeks.

The head of research and consultancy at Chesterton Suntec International, Mr Colin Tan, said December's transactions could render the final figure two to three percentage points worse than the estimate.

CB Richard Ellis predicts prices will fall 10 to 15 per cent this year and Knight Frank tips falls of 13 to 20 per cent.

Meanwhile, analysts say that most developers can hold off launches over the short to medium term if necessary.

Yet the market is not short of buyers and investors out for bargains, said ERA's Mr Lim. 'While the immediate future may be bumpy, we are confident there is light at the end of the tunnel.'

[email protected]