NO
QUICK RECOVERY FOR SINGAPORE PROPERTY MARKET : SEMINAR
15thJuly
2015
As
Singapore faces a "new normal" of slower growth and even stagnation
risks, the property market is unlikely to stage a major rebound even if some
cooling measures are relaxed now, market watchers said at a property seminar on
Tuesday.
Chua Hak
Bin, head of emerging Asia economics at Bank of America Merrill Lynch, warned
that Singapore may enter a period of stagnation over the next couple of years.
Recent
alarm bells were sounded when employment growth contracted for the first time
in the first quarter since the global financial crisis (GFC), loans growth
contracted in May for the first time since the GFC, and Singapore's inflation
plunged to the lowest in five years, he said.
Some
studies in the US have shown that macro-prudential measures such as housing
loan-to-value ratios and stamp duties are more effective as tightening tools,
but loosening these measures has less impact akin to "pushing on a string"
in a downturn, Dr Chua said at the Real Estate Developers' Association of
Singapore (Redas) property market seminar.
Redas
president Augustine Tan flagged that any recovery in the property market will
not be brisk. "We have to brace ourselves for a different mode of
operation as the real estate market enters a different period," he told
market practitioners at the seminar. "The build-up of the oversupply
situation in the private residential market will not abate in the short term
and recovery will not be a quick one."
The
private housing inventory from the last few years of government land sales
supply, along with the plunge in demand and rising vacancy rate, remains a drag
on the market, he said.
Private
home prices marked their seventh straight quarter of decline - the longest
downward streak in 13 years - based on the Urban Redevelopment Authority's
second-quarter flash index; over 89,000 new private residential units,
including executive condominiums, are expected to be completed from 2015 to
2019.
Savills
head of research Alan Cheong noted that prices alone do not provide a full
picture. "It is more about market transactions collapsing that one should
be concerned with," he said. Using the average monthly sales from January
to May, it will take 12 years to clear the stock of launched and unsold
inventory in the core central region. In the mass to mid-tier private homes
market, it will take over 11 years to clear the inventory assuming that the
government continues to sell land at the 2015 pace.
It also
seems that Singapore's economy is becoming less supportive of the property
market - going by lower GDP growth, slower population growth and a productivity
drive that has fallen far below the growth target of 2-3 per cent per year.
Labour productivity growth was negative in the last four years, while private
investment contracted over the past two years.
But as
the US starts raising interest rates, likely from September, the Sibor is
expected to climb to 2 per cent by the end of next year, Dr Chua projected.
Though past Federal rate hikes was accompanied by stronger US economic growth
that in turn buoyed Asian economies and currencies, "we think that this
time is different because of China", he said. A sputtering Chinese economy
is negating that lift from the US economy and changes in US consumption
patterns have reduced demand for Asian exports.
Property
consultants at the seminar on Tuesday noted that prevailing economic conditions
are also hurting key non-residential property segments.
As
manufacturing activities remain subdued and supply of multiple-user factory
space continues to outpace demand, rentals are expected to remain under
pressure, said DTZ head of research Lee Nai Jia. "Difficulty in leasing is
also expected to widen the rental gap between new and older industrial
developments."
The
relocation of tech companies like Google and Oracle from the CBD to modern
high-tech business parks that are some 30-40 per cent cheaper in rents does not
bode well for the office sector, property consultants noted.
According
to Christine Li, research director at Cushman & Wakefield, new office
leases as a proportion of total leases by floor area plunged to only 4 per cent
in the first half of this year from 15 per cent in 2014. And among relocation
contracts, as much as 88 per cent of the space is signed at cheaper buildings
such as high-tech industrial buildings, business parks and suburban office
buildings, up from 29 per cent in 2014. Office prices have shown to strongly
correlate with economic growth in the past, except in an oversupply situation,
Ms Li said.
In the
retail space, rents and prices are also under pressure amid sliding occupancy
rates. Knight Frank's survey of retailers showed that 53.3 per cent of the
respondents are mulling downsizing or moving retail outlets to cheaper
locations.
"The
existing trend of major retailers consolidating their operations could persist
through H2 2015 with the challenging retail market outlook," said Knight
Frank's head of research and consultancy Alice Tan. "An influx of new
retail space of 1.7 million sq ft in 2015 and 2016 could exert downward
pressure on prime retail rents island-wide by 1 to 2 per cent in 2015."
Info
Courtesy – The Business Times Singapore