Source : TODAY, Weekend, October 25, 2008
THE leasing market has become the latest casualty of Singapore’s weakening property market, with both residential and office rents posting their first declines since 2004 in the third quarter of this year.
According to Urban Redevelopment Authority figures released yesterday, rentals of private residential properties fell 0.9 per cent in the third quarter, compared to a 2.5 per cent rise in the second quarter. Office rents declined 0.8 per cent, swinging from a 6.3 per cent rise in the previous quarter.
Most analysts attributed falling residential rents to the double whammy of increased supply and weakening demand as the financial sector deals with the severe crisis.
“Instead of increasing headcount, most multinationals are holding back and waiting, so fewer expatriates are coming in,” said ERA Asia Pacific’s assistant vice-president, Mr Eugene Lim. At the same time, developers are holding off developments of their enbloc sites due to the credit crunch and rising construction costs. They are instead renting out these units, resulting in a sudden surge in supply, added Mr Lim.
Additional supply from completed projects will accelerate rental declines in the coming quarters, said Mr Colin Tan, Chesterton Suntec International’s research head. But this may not necessarily be a bad thing for Singapore. “On a country level, Singapore will now be more competitive, since rentals had started off on the high side,” he said.
Meanwhile, HDB prices continued to show resilience amid the downturn, posting a 4.2-per-cent rise. That was a slight moderation from the 4.5-per-cent increase in the previous quarter, which PropNex chief Mohamed Ismail attributed to the overall drop in median cash-over-valuation (COV) to $19,000.
“It’s interesting to note that the bigger drops in median COV were for five-room flats and executive flats. This is evidence of buyers resisting paying out larger COV for larger properties in this bleak economy,” he said.
Still, Chesterton’s Mr Tan finds the 4.2-per-cent hike “extremely disturbing” as it bucks the trend amid deteriorating fundamentals. “It must mean that there is a real shortage of resale flats. This can happen when there are more downgraders than anticipated and secondly, few sellers are upgrading to the private market, because of its affordability.”
Prices in the private residential property market fell 2.4 per cent, worse than the earlier flash estimates of 1.8 per cent.
ERA’s Mr Lim noted that some investors hit by the recent stock market plunge have started to offload their properties in “fire sales” to raise cash, although any major price declines going forward depends on the extent of such scenarios and whether developers also start to lower prices.
Overall, Knight Frank’s research head Nicholas Mak expects private residential prices this year to contract up to 3 per cent.
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