Softer 2009 ahead for property market

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After six quarters of robust growth at 3% or more per quarter, HDB’s flash estimate of 1.5% for 2008’s fourth quarter Resale Price Index (RPI) shows that even public housing has been impacted by the economic downturn.

Demand for public housing is thus still expected to grow in 2009, although not at 2007’s and 2008’s double digit rates. At an expected 139.5, up from last quarter’s 137.5, Q408’s flash estimate translates to an overall 13.9% growth in the RPI for public housing, surpassing PropNex CEO Mohd Ismail’s earlier expectations for public housing to reach an overall price increase of at least 13% for 2008.

Mohamed Ismail expects the RPI to grow by just 3–8% in 2009, with smaller (3- and 4-room) flats accounting for 5–8% growth and a slower 1–3% growth for larger flats.

“This will be evident, especially if the economy does not improve,” he forecasts, “as there will be more downgraders and cautious home buyers in the wake of retrenchments and tighter budgeting. But we should still see growth as demand still exceeds supply.”

On the private property front, a price correction phase is evident, with a drop of 5.7% from 173.3 points to 163.4, almost the same level as 3Q07. Such a large decline has not been seen for many quarters.

All the Regions (Core Central, Rest of Central and Outside Central) are estimated to register declines of over 4%, with the Core and Rest of Central Regions taking the brunt of the economic fall-out.

Mohamed Ismail expects a greater slide in the RPI for the Core and Rest of Central Regions of about 10% for 2009, with fewer property investors and speculators in the higher-range market.

“The Outside Central Regions, however, should hold its own and not dip by more than 3%,” he adds, “as prices there have already dipped to very reasonable levels. These are due to the recent launches where developers exercised sensitivity to the poor economy.”

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Softer 2009 ahead for property market

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