RESIDENTIAL property prices might fall 10 to 15 per cent in the next 12 months, a new report said.
UBS
said last week that while the market has remained resilient despite the
Government's cooling efforts, it is near a tipping point.
This
forecast is, however, considerably more pessimistic than other experts'
views, which mostly predict either stable prices or smaller falls of up
to 5 per cent.
But it is still less grim than estimates last
December when experts said prices could correct by as much as 30 per
cent on the back of that month's cooling measures.
While UBS
acknowledged that tight residential supply and low interest rates are
keeping prices resilient, it said other factors point to a more cautious
outlook over the next 12 months.
For instance, Singapore's economic growth, while still recovering, is more uncertain now.
The
Government's residential property cooling measures are also likely to
continue to discourage foreign buyers and resale market activity.
The
proportion of private residential homes bought by foreigners and
companies has fallen from 20 per cent last year to 7 per cent in the
first half of this year.
Meanwhile, the population growth
rate has also slowed and is likely to decline further given the recent
tightening of immigration policy.
And while the supply of
homes is still tight, the expected ramp- up from next year onwards
should help to compensate fully for the earlier supply shortage by 2014
or 2015, the report noted.
UBS expects 140,000 to 150,000
homes to be completed from this year to 2015, higher than its estimated
cumulative supply shortfall of 90,000 units built up from 2000 to 2011.
This
mix of negative factors has turned the bank sour on the property
market's prospects, leading to its prediction of a 'moderate' 10 to 15
per cent correction.
'Property developers still have strong
balance sheets, which may lower the probability of their having to
significantly lower the prices of their residential projects to generate
cash flow.
'We currently see a higher risk for mass-market
private homes (versus prime ones) as this segment has largely led the
current recovery, and (is likely) the bulk of private residential supply
over the next few years,' the report said.
Private home
prices inched up 0.4 per cent in the second quarter, according to
preliminary estimates, reversing a 0.1 per cent dip in the first
quarter.
Credo Real Estate executive director Ong Teck Hui, however, disagreed with the report's estimates.
Assuming no major events globally, he expects prices to move marginally, either up or down, similar to previous quarters.
'For
prices to correct 10 to 15 per cent, they will have to fall about 2.5
to 4 per cent every quarter from now. This means that something serious
has to happen and we should be experiencing some softening but we
haven't seen that,' he added.
esthert@sph.com.sg
Source: The Straits Times