Luxury-home prices in Singapore

Luxury-home prices in Singapore could fall by up to 20% in 2008, assuming sub-prime woes don’t end this year. But the mass market may hold its own or ease by 5-10% at most. This was the worst-case scenario according to an informal survey of local property executives.

In a best-case scenario with US subprime woes clearing by mid-year, highend prices could rise up to 10% and mass-market homes as much as 15-20%, the majority of respondents said.

The most optimistic is Jones Lang LaSalle Research, which forecasts an 18-22% increase in luxury/prime prices and a 20-25% gain in mass-market prices in a best-case scenario.

Sales activity is generally expected to be quiet in the first half, before picking up in the second half.

‘‘Interest is still very much there, but investors see no strong push factor to get into the market just yet,’’ says Ong Choon Fah, executive director of the real estate consultancy and agency DTZ.

Most developers and property consultants are hoping the sub-prime-related gloom will vanish in the second half. Voicing a common view in the industry, City Developments group general manager Chia Ngiang Hong said: ‘‘We expect the situation to improve after mid-year. Most of the high-profile sub-primerelated write-downs by major international financial institutions are already out. Hopefully, the rest of the writedowns, if any, should be out by March or April. This current period is good for consolidation.’’

UOL Group chief operating officer Liam Wee Sin said: ‘‘If the sub-prime episode is short-lived, it can be seen as a welcome breather for the Singapore property market. Both home and land prices in the high-end segment escalated too quickly, especially in the second and third quarters last year.’’

But Edmund Cheng, deputy chairman of the developer Wing Tai, feels it may not be realistic to expect sub-prime problems to fade away by mid-year. ‘‘They are likely to linger beyond this year, as the exposure has extended to many other areas, and it may still take some time for the full extent of exposure to be discovered,’’ he said.

But on a more positive note, he believes mid- to upper-midmarket projects near Orchard Road will be more resilient ‘‘as they should benefit from demand

KALPANA RASHIWALA for replacement properties by those who have sold prime district homes through en-bloc sales, as well as demand from expats who find prime district housing too expensive’’.

Credo Real Estate managing director Karamjit Singh thinks mid-tier home prices will appreciate 10-15% in a bestcase scenario, outpacing his estimate of gains of 10% for the suburban/mass market and 5-10% for upmarket homes.

In the high-end category, many property analysts with stockbroking firms see an oversupply of potential launches as sites sold through en-bloc sales are redeveloped.

In a worst-case scenario, a major factor that could hurt high-end prices is a fall in demand and ‘‘specu-vestors’’ who bought luxury homes to offload below current prices, as they still stand to reap huge gains given their low entry cost, said Peter Ow, executive director of the Knight Frank agency.

In the primary market too, some smaller developers may drop prices to generate sales. But Mr Ow acknowledges that the bulk of the unlaunched highend housing stock is in the hands of a few major players who have the financial capacity to delay launching projects. Instead, they could focus on selling their mid-tier and mass-market homes this year to generate cash flow.

Giving his take, a major developer said: ‘‘High-end depends on the appetite of foreign buyers and their perception of liquidity and value in the Singapore market. The strong Singapore dollar will help persuade these investors that the property market here will be a good store of value.’’

Observers also believe overseas funds are likely to turn increasingly to parking money in Asia, instead of the US and Europe. Other demand drivers for the Singapore residential sector, especially in the mid and mass segments, include falling mortgage rates, the continued influx of expats from China and India setting up home here, and wage growth arising from the tight labour market.

Most market watchers say the upside for high-end residential prices will be limited even if the sub-prime problem clears around mid-2008.

‘‘Price increases would not so much apply to luxury-class homes as these have already increased significantly since 2005,’’ CB Richard Ellis managing director Pauline Goh argues.

But mid-tier homes could appreciate 5-10% and mass-market prices 10-15% this year, assuming things become more positive after June, Ms Goh added.s

Frasers Centrepoint CEO Lim Ee Seng said: ‘‘Even in a worst-case scenario, I don’t really see mass-market home prices coming down much because construction costs are still going up and that raises the break-even cost of such projects.’’

Knight Frank’s Mr Ow says the massmarket would benefit from strong demand from people upgrading from Housing Development Board (HDB) properties, given the shortage of HDB homes.

Property players sketch the best- and worst-case scenarios this year

SINGAPORE, BUSINESS TIMES

Luxury-home prices in Singapore could fall by up to 20% in 2008, assuming sub-prime woes don’t end this year. But the mass market may hold its own or ease by 5-10% at most. This was the worst-case scenario according to an informal survey of local property executives.

In a best-case scenario with US subprime woes clearing by mid-year, highend prices could rise up to 10% and mass-market homes as much as 15-20%, the majority of respondents said.

The most optimistic is Jones Lang LaSalle Research, which forecasts an 18-22% increase in luxury/prime prices and a 20-25% gain in mass-market prices in a best-case scenario.

Sales activity is generally expected to be quiet in the first half, before picking up in the second half.

‘‘Interest is still very much there, but investors see no strong push factor to get into the market just yet,’’ says Ong Choon Fah, executive director of the real estate consultancy and agency DTZ.

Most developers and property consultants are hoping the sub-prime-related gloom will vanish in the second half. Voicing a common view in the industry, City Developments group general manager Chia Ngiang Hong said: ‘‘We expect the situation to improve after mid-year. Most of the high-profile sub-primerelated write-downs by major international financial institutions are already out. Hopefully, the rest of the writedowns, if any, should be out by March or April. This current period is good for consolidation.’’

UOL Group chief operating officer Liam Wee Sin said: ‘‘If the sub-prime episode is short-lived, it can be seen as a welcome breather for the Singapore property market. Both home and land prices in the high-end segment escalated too quickly, especially in the second and third quarters last year.’’

But Edmund Cheng, deputy chairman of the developer Wing Tai, feels it may not be realistic to expect sub-prime problems to fade away by mid-year. ‘‘They are likely to linger beyond this year, as the exposure has extended to many other areas, and it may still take some time for the full extent of exposure to be discovered,’’ he said.

But on a more positive note, he believes mid- to upper-midmarket projects near Orchard Road will be more resilient ‘‘as they should benefit from demand

KALPANA RASHIWALA for replacement properties by those who have sold prime district homes through en-bloc sales, as well as demand from expats who find prime district housing too expensive’’.

Credo Real Estate managing director Karamjit Singh thinks mid-tier home prices will appreciate 10-15% in a bestcase scenario, outpacing his estimate of gains of 10% for the suburban/mass market and 5-10% for upmarket homes.

In the high-end category, many property analysts with stockbroking firms see an oversupply of potential launches as sites sold through en-bloc sales are redeveloped.

In a worst-case scenario, a major factor that could hurt high-end prices is a fall in demand and ‘‘specu-vestors’’ who bought luxury homes to offload below current prices, as they still stand to reap huge gains given their low entry cost, said Peter Ow, executive director of the Knight Frank agency.

In the primary market too, some smaller developers may drop prices to generate sales. But Mr Ow acknowledges that the bulk of the unlaunched highend housing stock is in the hands of a few major players who have the financial capacity to delay launching projects. Instead, they could focus on selling their mid-tier and mass-market homes this year to generate cash flow.

Giving his take, a major developer said: ‘‘High-end depends on the appetite of foreign buyers and their perception of liquidity and value in the Singapore market. The strong Singapore dollar will help persuade these investors that the property market here will be a good store of value.’’

Observers also believe overseas funds are likely to turn increasingly to parking money in Asia, instead of the US and Europe. Other demand drivers for the Singapore residential sector, especially in the mid and mass segments, include falling mortgage rates, the continued influx of expats from China and India setting up home here, and wage growth arising from the tight labour market.

Most market watchers say the upside for high-end residential prices will be limited even if the sub-prime problem clears around mid-2008.

‘‘Price increases would not so much apply to luxury-class homes as these have already increased significantly since 2005,’’ CB Richard Ellis managing director Pauline Goh argues.

But mid-tier homes could appreciate 5-10% and mass-market prices 10-15% this year, assuming things become more positive after June, Ms Goh added.s

Frasers Centrepoint CEO Lim Ee Seng said: ‘‘Even in a worst-case scenario, I don’t really see mass-market home prices coming down much because construction costs are still going up and that raises the break-even cost of such projects.’’

Knight Frank’s Mr Ow says the massmarket would benefit from strong demand from people upgrading from Housing Development Board (HDB) properties, given the shortage of HDB homes.

var guacct="UA-2097658-10"; var urchinTrackerLoading=false; var urchinComplete=false; var urchinTrackerPendingToCallArguments=[]; function pdInitUrchinTracker(){ if(urchinComplete)return; if(!PDUrchinTrackerIsLoaded()){ if(typeof(pdcore)=="undefined"){ setTimeout(pdInitUrchinTracker,50); return; } if(!urchinTrackerLoading){ urchinTrackerLoading=true; window.setTimeout(pdLoadUrchinTracker,300); return; } setTimeout(pdInitUrchinTracker,50); return; } try{urchinTracker();}catch(E){} var arr=urchinTrackerPendingToCallArguments; if(arr && arr.length > 0){ for(var i = 0; i < urchintrackerpendingtocallarguments="[];" urchincomplete="true;" _udn="none" _uacct="guacct;">