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Thread: Luxury home prices to fall 32% by 2010: Nomura

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    Default Luxury home prices to fall 32% by 2010: Nomura

    Published March 27, 2008

    Luxury home prices to fall 32% by 2010: Nomura

    It says sector has risen too fast relative to rental expectations

    By UMA SHANKARI


    TAKING a bearish stance on Singapore's residential sector, Nomura Research expects luxury home prices to slide a staggering 32.3 per cent from their 2007 peak between now and 2010.

    Average prices in the luxury segment will fall 16.9 per cent in 2008, 10.3 per cent in 2009 and 9.3 per cent in 2010 as rental growth slows and yields are reappraised, Nomura says in a report.

    Luxury residential prices have risen too fast relative to rental expectations, the report says.

    'Sentiment in the market has deteriorated rapidly - asset prices look to have fallen by about 5 per cent over the first two months of the year, with falls of up to 15 per cent in some non-prime locations,' Nomura analysts Tony Darwell and Daniel Raats say.

    'We see asset prices being driven lower by marginal speculative sellers amid low transaction volumes and higher unsold pre-sale inventories.'

    These factors will add up to a major correction - but not a crash - with a 2010 average price of $1,847 per square foot, marginally higher than $1,811 psf in the 1996 peak and 22.4 per cent above the 2001 peak of $1,508 psf. The mass market will not be immune from falling prices amid rising new supply, Nomura believes. 'Mass residential prices appear on a firmer footing, supported by rental growth and prevailing yields,' its analysts say.

    'However, the advent of new supply and the resultant increase in rental availability in prime locations is likely to see demand that was once displaced to 'non-core mass market' locations returning to prime districts, hurting non-core rents and ultimately mass market prices.'

    As a result, mass residential prices will remain flat in 2008, climbing just 0.5 per cent, Nomura believes. And as new supply is completed in the prime districts, it expects prices to fall 10.3 per cent in 2009 and 10.1 per cent in 2010 - a total fall of some 19.4 per cent from the 2008 peak.

    In view of this, the firm is maintaining its bearish stance on Singapore residential property and says the market will move swiftly from a 'state of denial' to the realities on the ground.

    Residential rents are likely to remain firm in the short term, given the low vacancy rate, Nomura reckons. But rising new supply is likely to cap rental gains from the second half of this year. Nomura forecasts that the vacancy rate will rise from 5.7 per cent at end-2007 to 8.2 per cent at end-2010.

    Average rents are expected to peak in 2008, rising five per cent year-on-year to $3.64 psf per month, after rises of 14.1 per cent year-on-year in 2006 and 41.2 per cent year-on-year in 2007, Nomura says. But with supply on the rise, rents will ease 10.3 per cent year-on-year in 2009 and 15.7 per cent year-on-year in 2010.


  2. #2
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    Default Re: Luxury home prices to fall 32% by 2010: Nomura

    Absolutely agree with both hands up!

    Any detractors out there?

    Maybe they are all busy looking for property agents now to rid off their speculative property investments.

  3. #3
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    Default Re: Luxury home prices to fall 32% by 2010: Nomura

    Quote Originally Posted by Unregistered
    Absolutely agree with both hands up!

    Any detractors out there?

    Maybe they are all busy looking for property agents now to rid off their speculative property investments.
    Absolutely agree with the report below with both hands up!

    Any detractors out there?

    Maybe they are all busy looking to buy something fast.
    Quote Originally Posted by mr funny
    Published March 27, 2008

    Home prices surpass 1996 levels

    Even if the US sub-prime problem drags on, mid and mass market homes would still see price increases this year, says HAN HUAN MEI


    RESIDENTIAL property prices in Singapore saw phenomenal growth in 2006-7. Robust economic growth of about 7-8 per cent in the past three years, a growing number of millionaires and anticipated spinoffs from the integrated resorts ignited the high-end segment before finally filtering down to the mid and mass markets in the second quarter of 2007.

    By the end of 2007, prices in dollar terms had surpassed the levels in 1996, although the Urban Redevelopment Authority (URA) private residential price index had yet to hit the peak of 181.4 points achieved in Q2 1996. This is especially the case for new projects. For example, units in luxury projects like Cliveden at Grange, Hilltops and The Orchard Residences were selling at above $3,500 per sq ft compared with those in Ardmore Park, which were selling above $1,800 psf in 1996.

    In the mid-tier segment, units in projects like Aalto, Jardin and Zenith were selling above $1,600 psf in 2007, compared to 1 King Albert Park and Trellis Tower, which were sold at $900-$1,100 psf in 1996. As for mass market projects, 2007 saw units in projects like Fontaine Parry, Hillvista and Oasis Garden being sold at $850-$1,000 psf while in 1996, units in Hazel Park, Ballota Park and Sherwood Condominium were sold at $680 psf-$850 psf.

    In the last two years, the URA price index showed that prices of landed homes rose by 32 per cent while those of non-landed homes (apartments and condominiums) rose by 47 per cent. Furthermore, within the non-landed segment, prices of uncompleted homes (mostly new launches and developers' sales) grew by 53 per cent whereas those of completed homes (existing stock, resale transactions) rose 45 per cent.

    Based on URA price indices by region for uncompleted non-landed properties, the Core Central Region (CCR, districts 9, 10, 11 and Downtown Core and Sentosa) took the lead with a 67 per cent growth followed by the Rest of Central Region (RCR, Central Region outside the core region) with a 41 per cent growth and the Outside Central Region (OCR), with a 35 per cent growth.

    For non-landed homes in the resale market, the price increase was 45 per cent over the last two years, driven mostly by transactions in the CCR. Prices there rose by 43 per cent, followed by 31 per cent for those in the RCR and 28 per cent for those in the OCR.

    A comparison of median prices in Q4 2007 showed an interesting geographical shift across the island from Q4 2006. For simplicity, we have confined our analysis to non-landed homes.

    For the new homes sold as at Q4 2006, the highest price band was $1,500-$2,000 psf for properties in districts 1, 2 and 4. Examples of new projects in these districts in 2006 would include Marina Bay Residences, Lumiere, and The Coast and The Oceanfront at Sentosa Cove.

    Properties in the lowest band - below $700 psf - were found in districts 5, 8, 12, 13, 14, 16, 17, 19, 22, 23, 6 and 27. Examples of new launches at that time included Ferraria Park, One St Michael's, The Infiniti, The Quartz and The Stellar. Most of these are 99-year leasehold projects catering to the mass market. However, by Q4 2007, the highest price band moved up to over $3,000 psf for properties in districts 9 and 10 for projects like 8 Napier, Cliveden At Grange, Scotts Square and The Orchard Residences. Similarly, the lowest band was raised to $700 psf to $1,000 psf for projects in districts 3, 5, 8, 12, 13, 17, 19 and 22, reflective of prices of Casa Fortuna, Fontaine Parry, Oasis Garden and The Lakeshore.

    As for properties in the popular East Coast area, their prices have moved up from $700-$1,000 psf to $1,000-$1,500 psf for district 15. In district 16, they moved from below $700 psf to $700-$1,000 psf over the same period.

    In the resale market, there was a lag in price growth because this sector involved basically older properties which lacked the aesthetic appeal and quality of new properties. As at Q4 2006, among the properties that were sold, only those in district 9 made it to the top of the range for the price band of $1,000-$1,500 psf. These included properties like Aspen Heights, Cairnhill Crest, The Claymore and The Pier At Robertson. However, a year on, the price band moved up to $1,500-$2,000 psf. Transactions in district 10 joined this category, involving units in Ardmore Park, Draycott Eight and The Tessarina.

    With the exception of districts 4, 9, 10 and 11, resale transactions in the rest of the island were largely below $700 psf in Q4 2006, the price band for mass market properties. Similarly, in Q4 2007, property prices in the more popular districts (1, 2, 3, 5, 7, 8, 12, 15, 16 and 21) moved up to the $700-$1,000 psf price band.

    Notably, prices of properties in districts 1 and 3 as well as 11 moved up to the $1,000-$1,500 psf band in Q4 2007 from previous price bands of below $700 psf and $700-$1,000 psf respectively.

    Last year ended on a cautious note as the sub-prime mortgage crisis in the US had a somewhat negative effect on global financial markets and the economy. Most home buyers have been infected by the current mood and have turned cautious. Should the US enter a mild recession in the first six months of 2008 and the sub-prime problems clear up so that sentiment improves after June this year, the private residential market should continue where it left off in the third quarter of 2007.

    Luxury prices would remain firm, mid-market homes would be expected to rise by 5 to 10 per cent while mass market home prices could grow by 10 to 15 per cent in 2008, once the situation becomes more positive.

    In the worst case scenario, where the US sub-prime problem drags on to the end of the year and beyond, prices of luxury properties may ease marginally, while mid- and mass market homes would still see price increases, albeit at one to 2 per cent and 3 to 5 per cent respectively.

    Han Huan Mei is an associate director, CBRE Research, CB Richard Ellis.

  4. #4
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    Default Re: Luxury home prices to fall 32% by 2010: Nomura

    Quote Originally Posted by Unregistered
    Absolutely agree with both hands up!

    Any detractors out there?

    Maybe they are all busy looking for property agents now to rid off their speculative property investments.
    So the sour grape has finally found one article to make him so happy.

    What about the others that appeared in the Business Times today? e.g.

    1. Home prices surpass 1996 levels

    2. Prices and rentals of landed homes set to rise

    3. Residential rents seen rising further

    4. HDB resale buzz set to continue

    5. Retail rents unlikely to soften

    6. Shophouses star at auctions

    Also, below is an excerpt from Business Times 29 Feb 2008 about Kwek Leng Beng's views:

    On the high-end residential sector, Mr Kwek noted that it is supported not only by wealthy local investors with holding power, but also by well-heeled foreigners. 'Super-rich investors from Russia, Middle East and even hedge-fund managers have yet to come into Singapore in a big way.

    'With Singapore developing into a global city and placed into the limelight, it can be a very attractive place to invest for these well-heeled clienteles, as seen in London,' CDL said in its results statement.

    The next big wave for the Singapore property market will come when the two integrated resorts are operating successfully. 'It will be a different Singapore altogether. Singapore is a hub. I've been harping on this. Nobody believed me until last year,' said Mr Kwek.

  5. #5
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    Default Re: Luxury home prices to fall 32% by 2010: Nomura

    Quote Originally Posted by mr funny
    Published March 27, 2008

    Luxury home prices to fall 32% by 2010: Nomura

    It says sector has risen too fast relative to rental expectations

    By UMA SHANKARI


    TAKING a bearish stance on Singapore's residential sector, Nomura Research expects luxury home prices to slide a staggering 32.3 per cent from their 2007 peak between now and 2010.

    Average prices in the luxury segment will fall 16.9 per cent in 2008, 10.3 per cent in 2009 and 9.3 per cent in 2010 as rental growth slows and yields are reappraised, Nomura says in a report.

    Luxury residential prices have risen too fast relative to rental expectations, the report says.

    'Sentiment in the market has deteriorated rapidly - asset prices look to have fallen by about 5 per cent over the first two months of the year, with falls of up to 15 per cent in some non-prime locations,' Nomura analysts Tony Darwell and Daniel Raats say.

    'We see asset prices being driven lower by marginal speculative sellers amid low transaction volumes and higher unsold pre-sale inventories.'

    These factors will add up to a major correction - but not a crash - with a 2010 average price of $1,847 per square foot, marginally higher than $1,811 psf in the 1996 peak and 22.4 per cent above the 2001 peak of $1,508 psf. The mass market will not be immune from falling prices amid rising new supply, Nomura believes. 'Mass residential prices appear on a firmer footing, supported by rental growth and prevailing yields,' its analysts say.

    'However, the advent of new supply and the resultant increase in rental availability in prime locations is likely to see demand that was once displaced to 'non-core mass market' locations returning to prime districts, hurting non-core rents and ultimately mass market prices.'

    As a result, mass residential prices will remain flat in 2008, climbing just 0.5 per cent, Nomura believes. And as new supply is completed in the prime districts, it expects prices to fall 10.3 per cent in 2009 and 10.1 per cent in 2010 - a total fall of some 19.4 per cent from the 2008 peak.

    In view of this, the firm is maintaining its bearish stance on Singapore residential property and says the market will move swiftly from a 'state of denial' to the realities on the ground.

    Residential rents are likely to remain firm in the short term, given the low vacancy rate, Nomura reckons. But rising new supply is likely to cap rental gains from the second half of this year. Nomura forecasts that the vacancy rate will rise from 5.7 per cent at end-2007 to 8.2 per cent at end-2010.

    Average rents are expected to peak in 2008, rising five per cent year-on-year to $3.64 psf per month, after rises of 14.1 per cent year-on-year in 2006 and 41.2 per cent year-on-year in 2007, Nomura says. But with supply on the rise, rents will ease 10.3 per cent year-on-year in 2009 and 15.7 per cent year-on-year in 2010.

    Well well well....whats so surprising? Any primary school student would have told this 6 months ago.
    The rest of the market to follow....watch out for the official news in 6 months. Only then do speculators wake up.

  6. #6
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    Default Re: Luxury home prices to fall 32% by 2010: Nomura

    Quote Originally Posted by Unregistered
    So the sour grape has finally found one article to make him so happy.

    What about the others that appeared in the Business Times today? e.g.

    1. Home prices surpass 1996 levels

    2. Prices and rentals of landed homes set to rise

    3. Residential rents seen rising further

    4. HDB resale buzz set to continue

    5. Retail rents unlikely to soften

    6. Shophouses star at auctions

    Also, below is an excerpt from Business Times 29 Feb 2008 about Kwek Leng Beng's views:

    On the high-end residential sector, Mr Kwek noted that it is supported not only by wealthy local investors with holding power, but also by well-heeled foreigners. 'Super-rich investors from Russia, Middle East and even hedge-fund managers have yet to come into Singapore in a big way.

    'With Singapore developing into a global city and placed into the limelight, it can be a very attractive place to invest for these well-heeled clienteles, as seen in London,' CDL said in its results statement.

    The next big wave for the Singapore property market will come when the two integrated resorts are operating successfully. 'It will be a different Singapore altogether. Singapore is a hub. I've been harping on this. Nobody believed me until last year,' said Mr Kwek.
    Please list more but fact is that property market is sinking. You can yell and scream over housetops but the big hasn't struck yet. These are just minor shocks but the tsunami is coming and the waves will sweep you away. We will miss all your postings then.

  7. #7
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    Guest

    Default Re: Luxury home prices to fall 32% by 2010: Nomura

    Quote Originally Posted by Unregistered
    So the sour grape has finally found one article to make him so happy.

    What about the others that appeared in the Business Times today? e.g.

    1. Home prices surpass 1996 levels

    2. Prices and rentals of landed homes set to rise

    3. Residential rents seen rising further

    4. HDB resale buzz set to continue

    5. Retail rents unlikely to soften

    6. Shophouses star at auctions

    Also, below is an excerpt from Business Times 29 Feb 2008 about Kwek Leng Beng's views:

    On the high-end residential sector, Mr Kwek noted that it is supported not only by wealthy local investors with holding power, but also by well-heeled foreigners. 'Super-rich investors from Russia, Middle East and even hedge-fund managers have yet to come into Singapore in a big way.

    'With Singapore developing into a global city and placed into the limelight, it can be a very attractive place to invest for these well-heeled clienteles, as seen in London,' CDL said in its results statement.

    The next big wave for the Singapore property market will come when the two integrated resorts are operating successfully. 'It will be a different Singapore altogether. Singapore is a hub. I've been harping on this. Nobody believed me until last year,' said Mr Kwek.


    KLB is definitely right here.
    He is rich, he knows how rich people think, they see the future of spore that is why they invest here, they will not sell in 2010 like nomura said.
    nobody bother about nomura report in spore as they are always on the wrong side. They are wrong again this time.

  8. #8
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    Default Re: Luxury home prices to fall 32% by 2010: Nomura

    Quote Originally Posted by Unregistered
    Well well well....whats so surprising? Any primary school student would have told this 6 months ago.
    The rest of the market to follow....watch out for the official news in 6 months. Only then do speculators wake up.

    Dear Uncle Sour Grapes,

    I am sorry to hear that you will be disappointed once again after waiting for a correction in the last 18 months

    yours truly,
    primary school kid of Mr. Tan Koo Koo

  9. #9
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    Default Re: Luxury home prices to fall 32% by 2010: Nomura

    Quote Originally Posted by Unregistered
    Dear Uncle Sour Grapes,

    I am sorry to hear that you will be disappointed once again after waiting for a correction in the last 18 months

    yours truly,
    primary school kid of Mr. Tan Koo Koo
    Oh so many names of people saying this and that. But everyone can see what is happening. Tell them all to get more vocal. People may start believing. Hahaha.

  10. #10
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    Default Re: Luxury home prices to fall 32% by 2010: Nomura

    Two groups of sour grapes. One missed the boat and one stuck and cannot get out. God save them both. Dont worry in 10 years the first group will be able to buy again. Dont miss the boat then. In 15 years the stuck ones would be able to sell. So just relax now and enjoy what you both are good at. Post Post Post!!!!!

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