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Is red-hot property market starting to slow down?

Possible correction seen but underlying demand is still strong, say experts

AFTER months of racing along at a feverish pace, Singapore’s residential property market seems to be finally taking a breather.

Home sales and collective sales slowed last month, and property watchers have started to speak of a possible correction in the market.

‘A correction is going to take place. The question is: How severe?’ OCBC Investment Research analyst Winston Liew told Reuters.

Experts agree, however, that underlying housing demand is still strong, and that home prices will keep rising, although at a slower pace. Prices surged 13.5 per cent in the first six months of the year alone.

‘Property market fundamentals have not changed much over the period,’ said French bank BNP Paribas in a report on Thursday.

It is tipping mid-tier and suburban homes as the big growth areas for the rest of the year. These have lagged in the rebound, which has been led mainly by high-end homes setting new record prices.

‘We still see opportunities available on the fringe of the city and suburban areas, where land remains affordable to developers,’ BNP said.

It noted, however, that home sales had been falling since June, according to caveats lodged. Sales fell from 4,921 in May to 3,917 in June to 3,540 in July.

So far, just 1,127 sales have been lodged for last month, partly due to a time lag in caveats. BNP estimates, however, that even when all the data is in, last month’s sales will hit about 2,500 only.

Collective sales, which set a string of record land prices earlier this year, have also slowed to a trickle, with only one deal recorded last month.

Property analysts have offered several reasons for the current slowdown.

One is the sub-prime home loans crisis in the United States, which triggered weeks of stock market volatility in Singapore and in the rest of the region. Developers say this has led to more caution among foreign investors, some of whom are the biggest buyers of luxury homes in Singapore.

Consultants have also blamed the sharp run-up in property prices since the beginning of the year. With asking prices breaching the stratosphere, many buyers are now holding out for better deals.

Upcoming changes in rules on collective sales and higher development charges are also dampening the collective-sale market, previously a major source of housing supply and demand.

A fourth reason could be the month-long hungry ghost festival that ended last week. Fewer projects were launched during this time compared to previous months.

But projects that did go on sale last month. including The Parc in West Coast Walk and Soleil@Sinaran in Novena, received a strong response.

MCL Land has also quietly sold more than half its strata titled terrace homes in Bukit Timah since Monday, even before official previews. About a third of the 168 units at Hillcrest Villas have been taken up by the developer’s close associates at between $2.5 million and $3 million apiece.

‘Residential demand remains healthy, even though homebuyers and investors will tread cautiously,’ CB Richard Ellis executive director Li Hiaw Ho said.

He and other market experts agree that while market activity has slowed somewhat, the pace of growth will pick up again at year-end.

‘The stock market has started to stabilise and, come November, things will probably go back to the way they were before August,’ said Mr Lui Seng Fatt, regional director at Jones Lang LaSalle.


Source: The Straits Times 15 Sept 07

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