Residential Property Prices Set To Fall In Coming Months

[SNAblog]

http://www.propertywire.com/news/asia/singapore-property-price-falls-201006174228.html

Property prices in Singapore set to fall as transaction volumes dip by up to 88% in some districts

Thursday, 17 June 2010

The residential property market in Singapore is too hot and set for a correction in coming months, according to analysts. Industry experts say prices are already reaching a plateau and transaction volumes are slowing. Some districts have seen transactions drop by up to 88%.

Figures from the Singapore Institute of Surveyors and Valuers (SISV) show that there were only 899 caveats lodged for condominiums in the first three weeks of May compared with 3,060 in April.

And although new condominium projects are still doing well, property agents said homes sales in the secondary or resale market have dropped by up to 20% recently.

According to the Dennis Wee Group buyers are becoming more cautious. ‘Instead of seeing a 30% increase in transactions as in the month before, I only saw a marginal 3.5% increase,’ said Chris Koh, director at Dennis Wee Properties.

‘A lot of buyers are pulling their handbrakes. What they feel today is that the seller is asking for too high a price and they are adopting a sit and wait attitude,’ he added.

Figures from SISV showed sales falling across various districts as of the middle of last month. The prime districts of 9, 10 and 11 saw a massive 76% drop, while the downtown city area saw the sharpest decline of 88%.

It is also taking longer to close a transaction, according to ECG Property. A deal that used to take about 45 days is now up to 80 days.

Analysts expect the market correction to last between three and six months and some said home prices could fall by an average of 3 to 5%. Some banks may simply not lend at current asking prices, according to Eric Cheng, chief executive officer of ECG Property.

‘That also shows that these prices could be a speculation price instead of a true reflection price. I think the market is going through a slight correction,’ he said.

Analysts said prices may also be capped by more land supply due to be released by the Government. Other risk factors include volatile stock markets and the European debt crisis.

 

[Received_by_Kings]

Maybe drop by 20 cents especially for those public housing projects.

 

[borom]

An early warning about the dangers of keeping interest rates low
Jul 15th 2010

............keeping interest rates low while fiscal support is withdrawn is a natural policy mix. ......
Yet some economists believe that very low interest rates have costs that are easily overlooked. Raghuram Rajan, a former IMF chief economist and professor at Chicago’s Booth School of Business, is one worrywart. “We need to challenge the view that the central banks produce low interest rates and nobody gets hurt,” he says. The Bank for International Settlements (BIS),.....has similar anxieties.....asks whether the hidden costs of low interest rates might be greater than the visible benefits.

The BIS identifies several dangers .......
including a distorted allocation of capital and workers, excessive risk-taking, lopsided balance-sheets and destabilising surges in capital flows....... gives warning that “keeping interest rates low comes at a cost—a cost that is growing with time.”

.....least troubling of these risks is the potential for distortions of allocation, whereby some parts of the economy are overstimulated by low interest rates. This was a concern in 2002-04 when low short-term interest rates boosted house prices and diverted workers and capital into construction and property ventures. Many of those investments proved unwise and the jobs that went with them did not last.......

'..... Cutting interest rates is supposed to arrest steep falls in asset prices, and to persuade businesses and savers to stop clinging to the safety of cash and instead make riskier investments that help economic growth. It is tricky to judge when this necessary check on undue caution turns into an incitement to recklessness. .......

Low interest rates can have more insidious effects on balance-sheets..... companies and governments might load up on short-term debt to cut borrowing costs; .....if money is kept cheap for too long banks may be tempted to borrow excessively to fund long-term bonds, risking capital losses should interest rates suddenly rise. .....
Cheap money may also delay a cleaning-out of bad debts from the banking system........a long period of low interest rates in Japan during the 1990s allowed banks to refinance loans that ought to have been written off. .....keeps zombie firms alive at the expense of more efficient competitors or new start-ups........

“The cautionary tale from Japan is that keeping interest rates low without doing anything to fix structural problems may have little effect....

http://www.economist.com/node/16590877?story_id=16590877&CFID=133789382&CFTOKEN=85096099

One of the main reason why many have jumped in to buy properties despite rising prices is low interest rates.
The longer this low interest rate continues, the more damage will be done to the economy.
Hope election comes sooner rather than later as the higher up you go, the bigger is the fall.

 

[Brightkid]

.......Hope election comes sooner rather than later as the higher up you go, the bigger is the fall.

According to an old man, if MBT loose this election, all property's value will clash.

Not too sure about it though. Maybe we need to give it a go to cool the market ?