Friday, April 3, 2009

Record 13.8 Per Cent Fall In Private Home Prices

Source : The Straits Times, April 2, 2009

PRIVATE home prices fell a record 13.8 per cent in the first quarter of the year, with values of city-centre and city-fringe homes hit the most.

Flash estimates released yesterday by the Urban Redevelopment Authority (URA) reveal that the fall is the largest since the index started in 1975.

And they show that the market has now lost half of the gains it chalked up in the property boom just past.

The almost 14 per cent plunge is more than double the 6.1 per cent decline in the fourth quarter of last year and nearly triple the 4.7 per cent fall for the whole of last year, according to URA data.

Some property experts have described the fall as startling while others, such as Credo Real Estate managing director Karamjit Singh, said it was not unexpected.

He said sales were extremely weak in the fourth quarter following the Lehman Brothers collapse and that this followed into January, adding that 'the index is playing catch-up - it has always lagged the market'.

Contrary to typical expectations that city-centre areas would suffer the largest price drop, yesterday's data showed the biggest first-quarter price fall of 17.2 per cent hit non-landed homes in city-fringe areas.

Non-landed city-centre home prices fell 15.2 per cent while non-landed suburban home prices dipped 7.5 per cent, said the URA, which is set to give more details on the private home market on April 24.

So far, the mass market has been the most resilient of the three areas and will remain so, consultants said.

Many of the new private homes sold this year - some 2,000 units or more are expected to be sold for the first quarter, compared with 4,264 units during the whole of last year - were mass-market units. High-end home deals have been few and far between. If volumes rise due to more distressed sales, the price drop may be more pronounced, experts warned.

Prices also fell in the HDB resale market - for the first time since 2006 - albeit by just 0.6 per cent.

'While the fall in price of private residential properties in the first quarter was acute, the drab economic situation is expected to continue to place downward pressure on home prices in 2009,' said Knight Frank's director of research and consultancy Nicholas Mak.

But the fall may not be so sharp going forward. Developers have already made a 'quantum leap' in reducing prices during the first three months of the year, said Colliers International's director for research and advisory Tay Huey Ying.

'Although further declines in launch prices can be expected, the incremental drop is likely to be marginal and more gradual.'

She expects the rate of decline to taper off to around 8 per cent for the second quarter, and 3 per cent to 5 per cent for the third and fourth quarters. Overall, she expects an average fall of 25 per cent to 30 per cent this year, with a milder drop of 10 per cent to 15 per cent for the mass market.

However, the continued decrease does not signal that the bottom is close at hand.

'If it is going to be a deep and long recession, then the bottom of the market may not come in 2009,' said Chesterton Suntec International's head of research and consultancy Colin Tan.

Currently, all bets are out on whether the fall for this downward cycle will be deeper than expected though, according to Mr Singh, history shows that prices at the bottom of the present trough will be higher than those experienced at the lowest point of the previous downturn.

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