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Singapore market to plummet?

Catherine Deshayes

Singapore's property market could be set for a dramatic fall, amid increasing signs that prices in the country have peaked.

After a construction boom over the last few years, Singapore has witnessed significant property price growth of up to 70 per cent in some parts of the country since 2005.

Singapore was one of the hottest investments last year with Jones Lang LaSalle putting it at the top of their list.

Property prices had surged by a whopping 31 per cent and Colliers International reported that residential rents also jumped by up to 70 per cent last year alone.

However, now the housing market is succumbing to the global slump with official figures showing a 0.4 per cent increase, the slowest for four years, and prices are expected to fall further in the third quarter of this year.

Developers are reporting lower profits for the second quarter as the property market cools. City Developments, Singapore's biggest private property group, last week reported a 15% drop in earnings.

CapitaLand and Keppel Land, the two big state-owned developers, have announced profit falls of 43.5% and 16% respectively. Meanwhile, Singapore's FTSE property share index has fallen 35.2% from its peak last October.

CapitaLand's Chief Executive, Liew Mun Leong, said that the earnings fall was largely due to the moderation in the price increase for the Singapore property market, adding that the outlook for the high-end market would probably be very flat.

Singapore has suffered similar boom-bust property cycles before. In fact, the market in Singapore was extremely weak only a few years ago, before being rejuvenated in 2005, after the government eased lending restrictions, in an effort to boost the then sluggish construction sector.

However, property analysts say new developments including two casinos and a finance centre should help to underpin the long term market.

Rental yields are also expected to weather the storm, especially in central areas where demand is high.

A Spokesman for Jones Lang LaSalle said, "These new gaming resorts will be employing thousands, and some of the workforce will come from abroad creating demand for rental accommodation."

Singapore is likely to avoid the property market collapse that occurred in 1997 with the Asian financial crisis, according to Chua Yang Liang, Head of Research for Jones Lang LaSalle in Singapore.

However, he does expect Singapore to suffer a moderate downturn similar to that in 2003.

"Developers are better able to stabilise the market than previously, since the big ones now have the financial capacity to delay new residential launches to prevent supply excess while low interest rates are expected to support demand," said Mr Yang Liang.

Prices are expected to pick up again from 2010.

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