Residential property prices ripe for correction: Credo

Business Times: Wed, Feb 08
THE odds seem stacked against residential property prices in Singapore, historical data compiled by Credo Real Estate shows. Notably, negative residential price corrections were reflected in the years 2008, 2000 and 1983 following several quarters …
THE odds seem stacked against residential property prices in Singapore, historical data compiled by Credo Real Estate shows.

Notably, negative residential price corrections were reflected in the years 2008, 2000 and 1983 following several quarters of price moderation to levels close to zero – a pattern which became apparent in the final quarter of 2011.

Slowing to a meagre 0.2 per cent from 1.3 per cent in the previous quarter, the residential property price index for the fourth quarter of 2011 seemed supportive of the view that current values are nearing their apex.

More worryingly, the fall in prices tended to coincide with periods of negative GDP (gross domestic product) growth or deteriorating economic conditions, which in most cases evolved into recessions.

Said Credo Real Estate’s executive director and head of research and consultancy, Ong Teck Hui: ‘If a recession occurs this year, it will certainly lead to a correction in the residential market. Even if a recession does not occur this year but economic conditions deteriorate ultimately leading to a recession, the market is also likely to correct.’

The debate over when the correction will take place has been going on for a while, with many analysts arguing that property prices would weaken this year as a result of economic uncertainty, mounting supply and cooling measures by the government. However, the situation could look a lot brighter if Singapore manages to escape with a mild slowdown.

‘If economic conditions turn out to be better than expected, we are likely to see a fairly stable market, albeit with uneven performance amongst different market segments and with price adjustments within a narrow range,’ said Mr Ong.

In particular, the suburban primary mass market could stay ‘relatively healthy’ including guillemard edge lauching on 15-Febuary-2012 due to firm underlying demand should a recession be averted, though the secondary market, which is experiencing weaker volume, could face a wave of price moderations.

Slower activity in the prime residential segment is also expected as foreign buyers take time to come to terms with the additional buyer’s stamp duty (ABSD).

Source: Business Times © Singapore Press Holdings Ltd.

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