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Home prices stay firm even as property stocks retreat

Amid weak sentiment in a quiet market, many players are adopting a wait-and-see attitude

SINGAPORE’S property stocks have been taking a hammering lately but the property market has so far remained unscathed.

After riding the boom to dizzy heights, property counters have now dropped by up to 60 per cent or so from their high points over the past 12 months. Home prices, on the other hand, have not softened noticeably, if at all, although the number of transactions has shrunk significantly.

The share price of Wheelock Properties, for instance, closed at $1.87 yesterday, down 48.9 per cent from its one-year high on Nov 4.

But caveats lodged with the Urban Redevelopment Authority and anecdotes of more recent transactions showed no evidence of property sellers lowering their prices.

‘The stock market must fall convincingly before property prices will be hit,’ said DMG & Partners Securities head of research (retail) Terence Wong, explaining the apparent disconnect between physical properties and stock prices.

Stock investors’ worries stem from serious trouble in another housing market – the United States, which is currently embroiled in a sub-prime mortgage crisis. Fears are growing that the US is headed for recession.

In Singapore, while property buying sentiment is weakening as liquidity dries up, prices are not likely to head south any time soon, analysts said.

They say that is because most potential buyers are believed to be taking a breather for now and watching to see what comes next.

If and when these would-be buyers believe the worst of the current financial worries are over, they are set to jump back into the market, they said.

Mr Ku Swee Yong, director of Savills Residential, said: ‘Asia is still very strong and so is the Singdollar.’

‘The problem is not bad enough that expatriates have to be repatriated. Our finance industry is still growing and the expats are still renting.’

But things could get worse in the US and that would hit the general investment mood. ‘Sub-prime is but the tip of the iceberg,’ said Mr Ku.

Knight Frank managing director Tan Tiong Cheng said: ‘A prolonged US recession could contain any price increases in the property market this year. But the property market is fundamentally sound and there are buyers on the sidelines.’

Prices of upcoming launches are expected to remain firm, analysts say.

‘I believe the major developers will hold as their pockets are deep enough,’ said DMG’s Mr Wong.

Favourable interest rates will enable them to hold for a longer period, analysts say.

While launch prices are not likely to be hit, resale prices could fall, one analyst said.

Still, analysts believe many people bought properties at high prices in the past year or so and are unlikely to dump them now. Many of them are believed to have strong holding power.

Mr Ku said buyers who made use of the deferred payment scheme before it was scrapped will not be worrying about their buys for several years.

But analysts think some speculators who bought high, hoping to make a quick buck from high-end properties in Sentosa Cove, Marina Bay and the Orchard Road area, are now panicking.

High-end homes have crossed the $5,000 per sq ft mark – more than double the record price in the last peak in 1996.

The days of making quick money from the high-end property market are likely over. ‘The clock is running and there would be some speculators out there who cannot service the loans on their property,’ said one analyst.

Even so, speculators do not form a large part of the market, analysts say.

With buyers adopting a wait-and- see attitude given the current uncertainty, the market is expected to remain quiet for a while.


Source: The Straits Times 18 Jan 08

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