'10% fall in home prices, global uncertainties ahead'

[reporter2]

http://www.straitstimes.com/archive/...ahead-20141220

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'10% fall in home prices, global uncertainties ahead'

Analyst tips 2015 growth for S'pore to be below 3%

Published on Dec 20, 2014 12:45 AM

By Wong Wei Han


HOME prices here may slide another 10 per cent next year, while Singapore's exports face decidedly mixed prospects, a leading analyst has said.

JP Morgan's head of emerging Asia economic research, Mr Jahangir Aziz, said the key export market of the United States was recovering, but that another important market, Europe, was still looking very shaky.

On the property front at home, Mr Aziz said in an interview with The Straits Times that significant fresh supply will weigh on the market next year.

"Since 2010, there has been a coordinated massive increase in supply taking place, especially in the private housing market. This has brought down housing and rental prices, a trend that we think will continue into 2015, when the increased supply fully hits the market," he said.

"We're probably looking at another 10 per cent drop through next year. The price value of assets will decline as a result, which is a negative for consumption."

This may partly offset the potential benefits local households enjoy as oil prices continue to slump. JP Morgan expects local petrol prices to drop at a rate of about half the oil price decline rate, with a one- to two-month lag. For instance, a 30 per cent slide in crude oil prices would translate into roughly a 15 per cent fall in pump prices here.

Singapore's outlook also depends on the recovery in the US and Europe, which, as yet, remains a very mixed picture.

"We expect the US to grow by 2.5 to 3 per cent in 2015, up from this year's 1.5 per cent. Investment will improve as the US completes its fiscal consolidation; oil price decline will also encourage consumption and improve corporate margins," Mr Aziz said.

But he added that Europe faces many uncertainties.

"Structural problems in fiscal policies remain, and necessary labour market reforms have been much slower than the economy requires. We will likely see only small pockets of growth for quite some time," said Mr Aziz.

Against this backdrop, Singapore's growth next year should come in below 3 per cent, he believes. This is towards the lower end of the Government's 2 per cent to 4 per cent forecast.

Mr Aziz's pessimism is partly based on persistently weak demand for Singapore's exports, which account for around one-third of the economy.

Non-oil domestic exports to the US and the European Union fell last month, while total shipments gained a slight 1.6 per cent year on year after October's 1.5 per cent drop, data from trade agency IE Singapore showed.

"For our exports to really grow, US corporate spending on high-end equipment needs to really pick up, because that's where the value-add to Singapore is. That has yet to happen despite the slow recovery there," said Mr Aziz, in the interview this week.

But even after accounting for all the uncertainties, Singapore's economy is not in too bad a shape, he stressed.

"What is not being appreciated is that global growth has fallen massively since the global financial crisis, from around 4 per cent previously to hardly reaching 2 per cent now. That is a massive negative shock for an open economy and exporter like Singapore… I don't think the Monetary Authority of Singapore is going to be unhappy about these sorts of growth rates."

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[Rysk]

Yes! Best time to buy.. Probably in 2016 I guess..

[prop1688]

I would think a safer bet will be 2017 or earliest by end 2016

[Rysk]

I would think a safer bet will be 2017 or earliest by end 2016

Yes, should be around that period.. starting from end 2016 till 2017..

My timing is.. To sell when ppl rushing to buy J-Gateway during "last peak".. and to buy when J-Gateway TOP..

[kellogs]

what is the fair price for j-gateway if there were firesale?

[Luke65]

what is the fair price for j-gateway if there were firesale?

for a good firesale price, i would benchmark it 10% more to the ECs in punggol. Doubt there will be a firesale in j-gateway, its shaping up to a popular area but upside probably limited because it will take a long while to build up an area / district / town / second CBD. By then, the 99 year lease will have run out 10%-15% factoring in the construction phase of 3 years.

[Juniper]

buying Investing in property is unlike buying stocks, where every share in the same counter holds the the same value, whereas in property, there could sometime have a big disparity between a good unit and bad unit, some time as much at 20% in value or potential rental revenue.

So to me getting the best deal is not so much about buying the lowest psf or trying to catch the bottom of the market, its about the ability to buy these premium unit below valuation. And "premium" unit doesnt often come into the market, even if they do you will also have to hope that they are no competition. Which means to say that it often pays to buy when no one is buying.

If you ask me, I would say that 2015 is a good time to enter Orchard Road property because the market is starting to bottom out.

[moneytalk]

And "premium" unit doesnt often come into the market, even if they do you will also have to hope that they are no competition. Which means to say that it often pays to buy when no one is buying.

Well said Juniper, thumbs up.

[smellyfish]

if all these >10% fall materializes, then Mr Khaw Boon Wan would have failed in his attempt to limit fall to single digit. i love it when success and failure can be reduced to quanitfiable numbers...

[prop1688]

Look at today's news about SOR (233.5%) and SIBOR (13.5%) yearly increase. It will be scary down the road.....fire sales is just a matter of time

[Strata]

After GE 2015, I predict the adjustment of GST from 7% to 10% will likely to happen in 2017. If this is the case, what would be the impact to property market? Cooling measures will be tweaked/relaxed only after GE. Influx of FT will re-surface to meet 6.9million once our Infrastructure like housing, transport etc.. are ready..

[princess_morbucks]

On back of a supply glut.

The rising risk of a flat oversupply and the US Fed’s expected interest rate hike will cause home prices to decline more quickly towards the end of the year.

According to Barclays, the outlook for the domestic residential sector remains bleak as prices continue to fall and sales volumes remain depressed.

“We reiterate our negative stance on Singapore’s residential sector and expect home price declines to accelerate towards the end of 2015 as we see a risk of rising unsold inventory and a potential interest hike. We continue to believe the government will only start unwinding measures when prices fall a cumulative steeper 10-15%, perhaps in mid-2015,” stated Barclays.

- See more at: http://sbr.com.sg/residential-proper....e9cdZGA0.dpuf

[Poloclub]

At last, we can finally get over all that anxiety about interest rate hike speculation etc. Although the media is talking about 200% etc rise in interest rate etc I still think that the hike is still manageable and there is really nothing to be alarm yet.

Going forward, I do expect that MAS will throw a life line and tweak some of the cooling measures concerning financing and refinancing. And this should help bring some confidence back to the property market, which will generate more buying and selling activities.

On the whole, this is good news for real estate industry. Property agents should rejoice and those waiting on the side line should start looking at buying opportunities

[princess_morbucks]

At last, we can finally get over all that anxiety about interest rate hike speculation etc. Although the media is talking about 200% etc rise in interest rate etc I still think that the hike is still manageable and there is really nothing to be alarm yet.

Going forward, I do expect that MAS will throw a life line and tweak some of the cooling measures concerning financing and refinancing. And this should help bring some confidence back to the property market, which will generate more buying and selling activities.

On the whole, this is good news for real estate industry. Property agents should rejoice and those waiting on the side line should start looking at buying opportunities

http://www.businesstimes.com.sg/bank...june-economist …

THE market has underestimated the pace of higher interest rates in the US, with the first hit expected around June rather than in the second half of the year, as some expect, says Bank of Singapore chief economist Richard Jerram.

[Poloclub]

http://www.businesstimes.com.sg/bank...june-economist …

How quickly and how much the US interest rate will rise will greatly depends on the health of the world economy. A strong US currency will boost domestic consumption, however it will also hurt their export which will lead to trade deficit, and affect employment. At the moment, economies in Europe, China and many producing countries are not doing very well, hence I dont expect to see a drastic rise in USD interest rate anytime soon.

People who are affect the most will likely be those who over leveraged on big quantum and low yield properties. Watch out for this segment of the property market.

[stl67]

http://www.bloomberg.com/news/2015-0...t-to-fall.html

Bill Gross, the former manager of the world’s largest bond fund, said prices for many assets will fall this year as record-low interest rates fail to restore sufficient economic growth.

With global expansion still sputtering after years of interest rates near zero, investors will gradually seek alternatives to risky assets, Gross wrote today in an investment outlook for Janus Capital Group Inc., where he runs the $1.2 billion Janus Global Unconstrained Bond Fund.

“When the year is done, there will be minus signs in front of returns for many asset classes,” Gross, 70, wrote in the outlook. “The good times are over.”

Six years after the end of the financial crisis, borrowing costs in the world’s richest nations are stuck near zero, a sign investors have little confidence that their economies will strengthen. Gross, the former chief investment officer of Pacific Investment Management Co. who left that firm in September to join Janus, has argued the Federal Reserve won’t raise interest rates until late this year if at all as falling oil prices and a stronger U.S. dollar limit the central bank’s room to increase borrowing costs.


Maybe interest may not rise after all....