Prices For Private Housing ‘May Pass 1996 Levels’

Source: The Straits Times, 07 July 2007

The booming property market will drive prices for private housing above the 1996 peak by the middle of next year, according to an HSBC economist.

The bank’s senior Asian economist, Mr Robert Prior-Wandesforde, said yesterday: ‘The real estate market has probably further to run. We may be in some of the earliest stages of a bubble, but there is more for prices to go.

‘The private residential market is nowhere near that of mid-1996, so there is still room (for prices) to appreciate further even if we’re in the early stages of a bubble.’

Industry data that takes into account the prices of private residential properties suggests that levels in real terms are still about 25 per cent below 1996 levels.

Mr Prior-Wandesforde believes that property prices will go higher partly because the ratio of home prices to income is only half that of 1996, wage growth is running at multi-year highs and interest rates are low.

He also cited the speculative activity that is boosting prices.

And while prices in strict number terms may pass 1996 levels soon, once factors including wage levels are accounted for, the real catch-up will be some way off.

‘If I’m right, it will take 12 years to get back to the 1996 level. If you take into account wage and income levels, prices would still be considerably cheaper than during that period,’ said Mr Prior-Wandesforde, referring to private housing.

He also believes that growth in the construction sector will clearly ‘outperform’ gross domestic product growth in the next three to five years.

‘The retrenchment in the construction sector has come to an end,’ he said.

GABRIEL CHEN