Stay Sheltered: We expect a continued deflation in
residential prices, and primary home sales to weaken to
3,000-4,500 units in 2009. Within the office sector, we
anticipate office rents and capital values to weaken by
35% from the peak this year with softening demand and
looming oversupply. In the near-term, property newsflow
will likely be negative, with write-downs of office and
residential landbank, potential defaults, distressed asset
sales and slow take-up and launches

Housing Stock and Vacancy Rates to Increase
The net increase in housing stock over the next 3 years is
expected to be significantly higher relative to the past 3 years
given the strong primary sales registered in 2006 and 2007.
However, pipeline completion numbers as released by URA
have been coming off in recent quarters, indicating that
developers have also gradually delayed completions. We expect
these delays to continue to affect pipeline supply, given current
tepid market conditions.

Default of DPS Purchasers
Another sector-related theme that is likely to garner attention
in 2009 is the effect of the Deferred Payment Scheme (DPS)
on the developers when their respective projects obtained
TOP. Under the DPS, which was removed in October 2007,
developers were allowed to offer to purchasers of
uncompleted residential properties the option to defer the
remainder of the progress payments (after the initial 20%
downpayment) until the issue of TOP for the project.

Remain Cautious as Bad News Yet to Materialise
We continue to remain cautious on the property sector in
the near-term. Much of the key risks that we had discussed
– asset writedowns, negative job creation, sale of distressed
assets – have yet to materialize and these should continue
to weigh down the sector in coming months and hamper
share outperformance.