The economic downturn is hitting home, with private residential prices recording their steepest drop in a decade.
Private home prices fell by 6.1 per cent in the fourth quarter of 2008, worse than an early estimate of a 5.7 per cent drop.
The quarter-on-quarter decline in the October to December period follows a 2.4 per cent drop in the third quarter ended September. Strong demand pushed up private home prices by about 31 per cent in 2007. But the picture changed very quickly in just one year.
In 2008, overall prices of private residential properties fell by 4.7 per cent, hurt by the global slowdown. Market watchers said they expect to see more downside.
Karamjit Singh, managing director of Credo Real Estate, said: "I expect the decline to accelerate, going forward, as the full effect of the meltdown that took place in the fourth quarter is being felt by the market. Q1 (2009) and Q2 would definitely be negative. In fact, I won't be surprised if prices will reflect declines by more than 6.1 per cent."
Donald Han, managing director of Cushman & Wakefield, said: "We think, probably, Q1 will be worse than Q4, mainly because we are at the epicentre of the economic downturn. We expect home buying mood to also descend from here... probably anything from 6 per cent to 7.5 per cent for Q1 and the same number for second quarter."
Prices of homes in prime areas continued to slip faster than those in the mid-tier and mass market segments in the fourth quarter of 2008. They fell 6.5 per cent, compared with the 6.2 per cent drop for the mid-tier and the 5.9 per cent decline for the mass market segments.
It is unclear how long and how deep the recession will be, but some market players are already expecting the potential fall in private home prices to be comparable to levels seen during the Asian financial crisis when prices dropped by 42 per cent over two years.
Sales of private homes also declined in the fourth quarter. There were only 407 transactions, about 72 per cent lower than in the third quarter.
Despite the gloomy economic outlook, property analysts believe sales momentum will pick up towards the second half of the year. They expect 5,000 to 6,000 units to be sold in 2009, higher than the 4,264 transacted last year.
According to the Urban Redevelopment Authority, 706 uncompleted units were launched for sale by developers in the fourth quarter, down from 2,244 units in the previous three months.
Many developers have delayed projects as demand and prices head south. Analysts say that in total, about 10,000 units have to be deferred, easing concerns of an oversupply in the private residential market.
The frail market sentiment also impacted the private home rental market, which saw a 5.3 per cent drop in rentals in the fourth quarter.
Meanwhile, public housing prices remained more resilient. HDB resale flat prices in the fourth quarter rose by 1.4 per cent, albeit lower than the 4.2 per cent increase recorded in the third quarter.
But transactions fell by 24 per cent to about 6,190 units, while the median cash-over-valuation amount dropped by S$4,000 to S$15,000 in the fourth quarter. Property analysts expect the downtrend to continue.
Donald Han said: "You will have the (resale flat prices) beginning to taper off after a very strong 14 per cent last year. We probably expect the HDB prices to remain flat for the first half, before you see a slight dip towards the second half of 2009." - CNA/ir
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