Property market sentiment up again

But developers worry about higher land and labour costs

Published on Nov 02, 2012

By Esther Teo, Property Reporter

PROPERTY market sentiment improved again slightly in the third quarter, although developers remain cautious over possible macro and policy risks that could destabilise the market.

The real estate composite sentiment index for July to September inched up to 4.9, from 4.7 in the second quarter. It is compiled by the Real Estate Developers' Association of Singapore (Redas) and the National University of Singapore (NUS).

The index had declined for four straight quarters last year to a trough of 3.3 in the fourth quarter.

A score below five indicates deteriorating market conditions while a score above five reflects improving market conditions.

Redas chief executive Lee Suan Hiang said that although sentiment has improved, developers are concerned over the boost in land supply and the cost of doing business.

"On top of higher land cost, in this survey, developers have added higher labour cost and higher material cost as the two leading concerns. These have raised total development cost and exerted pressure on unit pricing," he said.

Industry players surveyed have become less gloomy about the prime residential sector.

A net balance of 8 per cent of respondents said they were pessimistic about how the sector was currently faring. This is down from 35 per cent expressing pessimism in the quarter before.

A net balance figure is the difference between the proportion of respondents who were optimistic and the proportion who were pessimistic.

Also, a net balance of 2 per cent were optimistic about the sector's prospects for the next six months, reversing a net balance of 21 per cent who were gloomy in the earlier period.

The office sector is also enjoying improving sentiment with a net balance of 9 per cent saying they were pessimistic about its current state. That is markedly better than the net balance of 31 per cent in the three months before.

However, this upswing might be short-lived as those surveyed were less upbeat about the outlook for the next six months, with 35 per cent expressing pessimism for conditions over the next half year.

The hotel sector led the sentiment index with the brightest outlook. A net balance of 35 per cent were positive about current conditions while the outlook for the half year ahead was almost as bright with a net balance of 27 per cent feeling cheerful.

A statement jointly issued by Redas and NUS yesterday also noted that 23 per cent of developers surveyed plan to launch substantially more units over the next six months.

About 60 per cent of respondents expect prices to stay steady, down from 65 per cent previously, while more developers are showing keener interest in government land sale and collective sale sites.

A majority of survey respondents also expect the third round of quantitative easing - the big cash injection from the US central bank - to lift fund flows into the real estate investment trust market.

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