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Thread: Home prices to fall 20%: Morgan Stanley

  1. #1

    Default Home prices to fall 20%: Morgan Stanley,00.html?

    Published December 8, 2011

    Home prices to fall 20%: Morgan Stanley


    PRICES of residential properties are expected to take a 20 per cent haircut, according to a report issued by Morgan Stanley Research.

    Though new home sales have been holding up relatively well with 1,632 units being sold in the month of October, it is key to note that the bulk of transactions stem from the Outside Central Region (OCR), implying a more mass-market type driven demand.

    Commenting on the issue, in- house analyst Sean Gardiner said: 'This supports anecdotal evidence from the industry that demand for the mid- to high-end of the market is slow. In fact, sales in the Core Central Region (CCR) are down some 77 per cent year-on-year.' But that does not mean that the pricing of mass market properties will hold up forever.

    Highlighting that the challenge is in 'gauging the magnitude of the correction', Mr Gardiner noted that the segment's pricing is expected to come under pressure over the next few months and predicts prices to be down 20 per cent by the end of 2013.

    Exacerbating the situation is growing inventory levels, which have since risen above 2008's peak, with 5,394 unsold units as at end-October. In fact, according to a real estate survey carried out by the National University of Singapore (NUS), developers are starting to show signs of cold feet as supply piles up. Findings from the survey noted that sentiment among developers has declined from just over 5.5 - whereby 10 is the most positive and 0 the most negative - at the start of 2011 to 3.4 as at end- September.

    'We expect 12,000 units of new supply (private residential) in 2012 and 13,000 in 2013, including planned but not yet started projects. This compares to our incremental demand expectations of 4,000 private units per year, although if prices fall enough, we could see some higher-end Housing and Development Board (HDB) demand trickle through into the private market,' pointed out Mr Gardiner, who expects vacancy rates to escalate next year.

    Together with other factors such as a lacklustre gross domestic product outlook and weaker population growth as expatriate numbers dwindle, it seems the bears have successfully taken over the reins of the domestic residential market.

    For now, though prices in the physical market may appear seemingly resilient, one should bear in mind that values could be buoyed by a variety of factors, such as low interest rates, high liquidity in the banking sector, and a spike in demand of properties from foreigners, especially the Chinese, as highlighted in the report.

  2. #2

    Default Morgan calls underweight on S'pore property, sees 20% correction,00.html?

    December 8, 2011, 4.04 pm (Singapore time)

    Morgan calls underweight on S'pore property, sees 20% correction


    Morgan Stanley on Thursday issued an underweight call on Singapore property, following the tightening measures announced on Wednesday.

    Morgan's analysts believe property may correct by 20 per cent and lacklustre performance could carry on throughout most of 2012.

    'The stocks are down 30 per cent from their peak in 4Q10, pricing in a 10-15 per cent property correction, we think. But, we think the peak to trough correction will be closer to 25 per cent suggesting another 20 per cent or so downside from here,' they said.

    'Also, the market needs to digest the impact from these measures and developer stocks typically only truly trough 1-3 months before the MoM change in property prices - a 1Q13 event, meaning lacklustre performance for the sector could carry on through most of 2012,' Morgan's analysts said.

    The government has imposed an additional buyers' stamp duty (ABSD) for the Singapore property market which leads Morgan's analysts to issue their cautious industry view on the developers. Foreigners and corporate entities buying residential property will pay 10 per cent ABSD. Permanent residents will pay 3 per cent ABSD beyond the first residential property and Singaporeans will pay 3 per cent ABSD beyond the second residential property.

    In addition, the government will be increasing supply of executive condominiums (ECs) from about 4,000 to up to 5,000 for 2012.

  3. #3
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