Tuesday, December 30, 2008

DTZ Expects 2009 To Echo Property Price Plunge Of 2008

Source : The Business Times, December 30, 2008

Prime district property prices fall by 20%; similar decline seen in 2009

Prices of condominiums and apartments in the prime districts have fallen by more than 20 per cent in 2008 on a year-on-year basis, says DTZ.

DTZ is also forecasting a further decline of 15-20 per cent for this segment of the market in 2009.

Based on its preliminary analysis of official data, DTZ said that prices of non-landed freehold private homes in the prime districts fell by 14 per cent quarter-on-quarter (qoq) in the fourth quarter of 2008.

This follows two consecutive quarters of declines of around 4.5 per cent each.

The prime districts include District 9, 10 and 11.

Overall average prime prices fell 21.6 per cent year-on-year (yoy) to $1,160 per square foot (psf), below the level of $1,200 psf registered in Q207.

Freehold non-landed homes outside the prime districts fell in Q408 but at a lower rate of 9.3 per cent qoq or 10.5 per cent yoy.

Landed housing prices also fell 5.7 per cent qoq, or 2.9 per cent yoy, islandwide in Q408.

The fall in prices follows dismal developer sales in October and November with only 112 and 192 units sold in the primary market respectively, compared to the monthly average of 444 units sold in the first nine months of the year.

DTZ said that based on caveats lodged, preliminary data from URA's REALIS showed that the number of transactions in the year is only about 35 per cent of last year's 38,100 units.

On the upside, the percentage of HDB upgraders continued to grow. In 2008, a higher proportion of purchasers with HDB addresses was registered with 37 per cent of all buyers expected to be HDB upgraders in 2008 compared to 22 per cent in 2007.

Based on available caveats in URA's REALIS, the number of buyers with HDB addresses in Q408 is 582. While this is a preliminary number, it represents 43 per cent of total caveats lodged so far in the fourth quarter. DTZ noted that this is higher than the 41 per cent in Q308, 36 per cent in Q208, and 28 per cent in Q108.

'HDB upgraders buy mainly for owner occupation, so falling private home prices is a good opportunity for them to upgrade with greater affordability,' said DTZ senior director (research), Chua Chor Hoon.

But DTZ said that the downturn in the economy will deter buyers from committing to property purchases and sales are expected to continue to remain low in 2009.

Lower rental returns will not help either.

DTZ said that average monthly rents of prime non-landed homes decreased in Q408 by 9.4 per cent qoq or 9.2 per cent yoy to $4.36 psf.

Outside the prime districts, rents held up better with an increase of 2 per cent yoy, despite a fall of 1.2 per cent qoq.

The extent of price corrections is still uncertain but Nomura has already adjusted its forecasts. In March, it forecast average prices in the luxury sector to fall by 32.3 per cent from the 2007 peak over 2008-2010 - 16.9 per cent in 2008, 10.3 per cent in 2009 and 9.3 per cent in 2010.

It now expects luxury prices to fall 43.8 per cent from the peak, and mass residential prices to fall 32.1 per cent as yields move out by an additional 25-50 basis-points.

OCBC analysts also believe that high-end property prices could decline by 15-20 per cent in 2009 due to weak sentiment, unsold inventories and potential risks of buyers' default and fire-sales.

OCBC expects mass market property prices to remain resilient, supported by the stability in HDB prices. For the mid-market properties, it expects prices to fall further in 2009, with a projected decline of 5-10 per cent.

No comments: