Property prices at record high

Thu, Nov 26, 2009

my paper


PROPERTY prices in Singapore jumped an all-time record 14.3 per cent in the third quarter, in tandem with the rise in prices elsewhere, according to some of the latest global data.

However, property experts here say the steep rise in housing prices is unlikely to continue, thanks to a slew of government- introduced measures to prevent the market from overheating.

Quarter-on-quarter house price changes in Singapore, Britain, Canada, Germany and South Africa are back in positive territory after the financial crisis, according to Global Property Guide's latest data.

In the third quarter, price rises have occurred in 16 countries, and fell in only 11, of the 27 countries that have published their latest quarterly figures.

Market overheating is as much a concern in Singapore as in Hong Kong, the Guide says.

However, despite the quarterly jump in Singapore, prices are still down 11 per cent over the year, according to the Guide's calculations.

The Guide's data reflects price changes after inflation, giving a more realistic picture than the more upbeat nominal figures usually preferred by real-estate agents.

The fact that housing markets are recovering in real terms is significant, as dramatic declines in property markets are typically followed by a period in which house prices are static in nominal terms, but decline in real terms.

However, the world seems polarised between the Asian economies - which are enjoying strong economic growth and high residential-property price rises (except in Thailand) - and Eastern Europe and the United Arab Emirates, where growth has stalled and property markets have crashed.

Even there, figures for the latest quarter offer hope.

The driver of world economic growth, the United States, appears to be in positive territory as well: its Q3 house-price changes were up nominally by 3.1 per cent, according to the Case-Schiller index, or up 1.2 per cent after inflation.

In nominal terms, the Case-Schiller index recorded an 8.9 per cent decline in the year to Q3, a marked improvement over the 14.7 per cent decline in the year to Q2, and the 19 per cent drop in year to Q1.

Similar recoveries can also be seen elsewhere in the Asia-Pacific region.

Australia's housing markets were up 4.9 per cent year-on-year to Q3 this year. Darwin had the highest price increase among Australia's eight capital cities, followed by Melbourne and Canberra.

The upsurge appears to have been partly fuelled by a genuine housing supply shortage. Key interest rates in Australia are now on the rise.

New Zealand experienced a more modest increase of 2 per cent over the year to Q3 this year. Median sales prices in New Zealand are now back at levels seen in the middle of last year.

Hong Kong's housing market, meanwhile, has entered a phase of irrational exuberance.

House prices there rose by 3.1 per cent over the year to Q3, a significant improvement from the 7 per cent year-on-year decline ending Q2. In the three months to September, house prices jumped 11.1 per cent.

Britain, Canada, Germany, and South Africa have seen increases in the third quarter, after declines in every quarter since last year.

In Britain, house prices were up 3.4 per cent in the third quarter, according to Nationwide, and 2.1 per cent, according to the Land Registry. In fact, British house prices have been rallying since May.

Canada, Germany and South Africa saw modest increases of less than 1 per cent in Q3.

Meanwhile, investors in Dubai, UAE, have something to be optimistic about: Dubai's nominal house-price index increased 7 per cent in the third quarter, a significant improvement from an 8 per cent fall in Q2.

As for the Singapore market, some say prices may have already peaked. Mr Donald Han, managing director of real-estate brokers Cushman & Wakefield, noted that mass-market prices are already hovering at peak levels, aided by active pick-up in residential activity for the mid to low-end properties.

Sell-out launches of private condos The Caspian near Jurong Lake and Alexis near Queenstown MRT station in Q1 show that confidence and liquidity have returned to the marketplace.

"But Q3 prices have gone up too fast, in too short a time," he warned. "The steep V-shaped recovery cannot be sustained. The market needs a breather."

To cool the real-estate market, the Government scrapped interest-only housing loans and the interest-absorption scheme in September.

Earlier this week, the Housing Board announced that it expects to offer between 10,000 and 12,000 flats every year over the next five years to meet growing demand.

More government land will also be released for development.

This is why PropNex's chief executive, Mr Mohamed Ismail, expects housing demand and price increases to continue "in a subdued manner" of 2-3 per cent in the next two quarters.

But there could be more buzz for luxury properties priced above $2,200 psf.

Said Mr Han: "Top-end prices can go up by 25 per cent, as high-end investors look for bargains in Districts 9, 10, 11, Sentosa Cove and the Marina Bay areas."

He also expects prices to climb 11 per cent for high-end units (priced between $1,500 and $2,000 psf) and 7 per cent for mid-tier ones.