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Thread: Banks see plunge in home prices in next two years

  1. #1
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    Default Banks see plunge in home prices in next two years

    http://www.straitstimes.com/Money/St...ry_239497.html

    May 21, 2008

    Banks see plunge in home prices in next two years

    New homes, rising vacancy rates, unsold condos and fewer rental deals cited as reasons

    By Fiona Chan, Property Reporter


    THE slowdown in the Singapore housing market has prompted two banks to predict a dramatic plunge in home values in the next two years.

    In two starkly bearish reports, Barclays Capital and Credit Suisse have forecast drops of up to 40 per cent in home rents and prices, as demand and supply dynamics move in favour of buyers.

    The reports, issued in the last two weeks, pointed to the malign cocktail of a flood of new homes coming on the market, climbing vacancy rates, a rising number of unsold condominiums and fewer rental transactions.

    They also raised concerns about the possible dumping of units by speculators. Barclays said that should this happen, private home prices could slide 28 per cent to 30 per cent by 2010.

    Credit Suisse predicted a possible 40 per cent drop in rents and prices. Its analysis showed that sub-sale prices recently started to dip at several developments.

    Both banks also noted that developers were now more generous with price cuts, stamp duty rebates and agent commissions in an effort to move units. They warned that smaller developers were likely to 'break' first.

    'Just six months ago, City Developments and a few others gave zero commissions to agents,' Credit Suisse said. By March, most were giving 1 per cent to 5 per cent, an increase of three to 10 times in just six months.

    'When Singaporean developers start to reach out to agents with higher commissions, you know they are feeling the pain,' it said.

    The pain is coming from slower growth in home rents and prices, as the effects of the United States sub-prime mortgage crisis takes its toll on market sentiment in Singapore.

    Private home prices rose a smaller-than-forecast 3.7 per cent in the first quarter. Even then, Barclays analysts said this could have been boosted by a handful of high-priced transactions and 'may not reflect the depth of pessimism in the market'.

    Sales and launches of new homes also fell sharply last month, extending the slump.

    Mr Colin Tan, the head of research and consultancy at Chesterton International, agreed with the Barclays report about a correction in prices.

    As more new homes are completed over the next few years, he said, rents will feel the pressure and prices will start to fall.

    Not all property analysts, however, have such a gloomy take on the housing sector.

    Kim Eng analyst Wilson Liew believes the oversupply situation may be overstated. While there are 32,000 units being built and 42,000 more in the pipeline, current market sentiment could help slow the rate at which the planned units come onstream.

    'It is likely that most of these units would be deferred indefinitely until sentiment returns or when construction resources ease,' he said.

    Developers could also keep lands in their landbank rather than develop them if there is no demand, suggested Macquarie Securities' head of Asean research, Mr Soong Tuck Yin.

    Both he and Mr Liew believe the upcoming integrated resorts will give Singapore a boost and, while there may be a temporary weakness, home prices are unlikely to collapse.

    Mr Soong also said developers had stronger balance sheets now than in previous market troughs, and the current low interest rates and high inflation could lead people to buy properties as a hedge against inflation.

    The Credit Suisse report, however, said negative real interest rates - often touted as a driver for property purchases - had not historically helped home sales. It also said that even with construction delays, actual completions had usually come in higher than forecast.

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  2. #2
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    Default Re: Banks see plunge in home prices in next two years

    Hi, can someone please post the Barclay's report here? Thanks.

  3. #3
    meesiammaihum
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    Default Re: Banks see plunge in home prices in next two years

    The report is 2 weeks old and ST has chosen today to publish an article on it. Why?

    And what bearing does today's ST article have on the Masterplan 2008? Which many people said will be out on Friday?

  4. #4
    paperplate
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    Default Re: Banks see plunge in home prices in next two years

    Actually the data is very misleading...

    I have been monitoring residences @ evelyn for eg.

    Last yr Feb 07, i went to the showflat, developers still got above 30th flr unit selling at $1.3 to 1.4k psf

    Then, i suppose becoz of greed and fear..got one foreigner somehow kena conned to offer $2k for tat unit (below 30th floor) on Jul 07 shown on the newspaper today.

    A sensible buyer at that time will not pay $2000psf, simply becoz if you make a calculation, it is a whopping 50% price hike within 5mths!!!
    I can only say congrats to the seller...

    Then, data shown that a unit above 20th floor sold at $1599psf ((1599-1350)/1350= 18% increase since feb 07. To me, its a fairly good deal becoz last yr overall price increase exceed 30%.

    Since 2006 till now, property price had increased by 40-50% so far on average. I felt absurd when the banks predicted a 40% fall in price for the next 2 yrs...do they mean prices will fall back to 2005-2006 prices?

    To me, I feel that with coming IR, F1 and youth olympic...I really cannot imagine price to be the same as 2005. I believe that a healthy property price growth will be 10% a year...last yr 30%++ increase is due to excessive speculation and not sustainable(bull and crash cycle caused by greed and fear). That is the reason why we are seeing those highly speculated condo price to corrects now.

    I personally still very bullish on the SG property market (US subprime had somewhat prevented a bull and crash cycle.

    For Eg, I am actually eyeing a studio unit at Southbank. Last yr March developer sold their last studio unit at around $800psf. So if I were to factored in a fair price increase of 15 to 20% increase for higher floor units...I will be getting one unit there once sellers r asking at around 950 to 1000psf. Now for high floor studio units, sellers are still asking above $1100psf. Hope more bad news will make them reduce their asking price to a more realstic level.

    Any comments are welcome...

  5. #5
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    Default Re: Banks see plunge in home prices in next two years

    These bad news are for the speculators out there.To remind them that they can be burned .If you are not one of them just relax.The price will go up but the speculators are not welcome.If not more bad news released.

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    Default Re: Banks see plunge in home prices in next two years

    Hey Paperplate, how did you get the information about the "stupid" foreigner? Useful info. Are you expecting a 13-15% drop at "evelyn"? From $1100 to 950?

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    Default Re: Banks see plunge in home prices in next two years

    While 40% looks drastic, i bought a unit last year in Guilin View & had followed prices around the Bukit Gombak area (Madeira & Palm Garden) closely - the prices these developments had over the Jan 07 to Sep 07 period jumped 40% on average, on top of the gains made in 2006 & a bit from 2005. If one assumes that part of this run up is merely froth ie panic buying, speculation etc, then a retracement of say 20-30% is probably not too drastic in this context. That has been my call (a 20% decline) all the while and I think we are seeing that pan out. But i have to say 40% is not ruled out as things always overshoot their equilibrium. Mind you, we havent seen the worst of economic news hit the headlines yet. That's when sentiment of the masses gets affected.

  8. #8
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    Default Re: Banks see plunge in home prices in next two years

    Well everyone is entitled to their own view and who ever said that credit suisse and barclays were the best at predicting property price trends, to those who believe them, good for them, and for the rest and that includes me, I think they are painting worst case scenarios and which "may" or may not happen....

    Sure some speculators will dump their units, but only bad units that might not even get rented, those in possession of good units will not just dump them, they can enjoy the yield if there are no buyers, so bottomline again buy carefully into any development and of course do not overstretch yourselves and you will be okay.....

    Last but not least is the issue of sustainability, if rentals are downtrend (which i think not) and so are interest rates, we are even, it is still a good investment.

  9. #9
    T Mobile
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    Default Re: Banks see plunge in home prices in next two years

    I do believe that prices will retreat back to the early 2007 period due to more 'cautious' buyers and 'sensible' sellers. This possibly means a 20-25% adjustment from early this year's peak. I also predict rising in prices again once US sub-prime crisis eradicates.

    However, looking at the high rising commodity prices, construction costs and high enbloc prices the developers paid for, cannot really depict the scenario of them selling at a loss.

    I would assume developers are sensible and smart enough to shelve some of projects and launches, while govt would regulate land sale such that land costs are not too high for FT and FDI, but not too low that crash the property market.

    In the long run, I believe local properties are good hedges during stagflation, still viable for long-term investors and home seekers, but current sentiment has kept the speculators out.

  10. #10
    Unregistere
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    Default Re: Banks see plunge in home prices in next two years

    FINALLY THE NEWS SPECULATORS DREADED TO HEAR IS OUT. THE FINAL NAIL HAS BEEN DRIVEN INTO THEIR COFFIN. BLOOD EVERYWHERE. PANICKY SPECKYS FLEEING. OH THE EXITS COVERED WITH BLOOD....

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