April 29, 2008

Property market looks weak: Citi

THE broader economic backdrop for the Singapore property market generally looks weak in the next 18 months, says Mr Don Hanna, Citi's global head of emerging markets economic and market analysis.

'The level of economic activity that we foresee in general continues to weaken this year and next,' he told reporters on the sidelines of Citi's closed-door Asia Pacific property conference at the Ritz-Carlton Millenia hotel yesterday.

One of the implications of the United States subprime crisis is that central banks in Singapore and many other nations are more concerned about the way real estate is financed, he said.

'In an economy like Singapore, which is probably the most open in the world, where you are going to see weaker global demand and lower trade flows, and as a result, lower income,' he added. And that would affect general demand for property, he said.

But Asia is in much better shape to ride out the downturn, said Citi Investment Research's director of research for the Asia-Pacific, Mr Adrian Faure.

He told reporters that a speaker from US home-loan lending giant Fannie Mae had said that there has never been a time when the US saw a fall in property prices all across the nation.

'But all of us in this part of the world are used to extreme and sharp up-and- down cycles, where these markets tend to be very efficient. They correct rapidly,' said Mr Faure.

In good markets, investors tend to be less choosy but as credit conditions get tougher, companies with high quality credit will have it easier, he said.

'Inevitably, this downturn is going to be a great opportunity for the big (firms) to consolidate, and to get better access to capital and projects.'