S'pore home prices to drop 20%: Morgan Stanley

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Residential property prices in Singapore are expected to drop 20 percent, according to a report by Morgan Stanley Research.

Though sales of new homes have been holding up well, with 1,632 units sold in October, it was observed that the bulk of transactions came from the Outside Central Region (OCR), reflecting a demand for more mass-market type properties.

“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 percent year-on-year,” commented Sean Gardiner, an in-house analyst at Morgan Stanley.

However, he also noted that this does not mean that prices of mass market properties will hold up forever.

Stressing that the challenge is in “gauging the magnitude of the correction”, Gardiner said prices in this segment are expected to come under pressure over the next few months and predicts that prices will go down by 20 percent by end of next year.

Meanwhile, according to a survey by the National University of Singapore (NUS), property developers are starting to be more cautious as supply increases. Findings from the survey showed that sentiment among developers had fallen to 3.4 as of end-September, from above 5.5. 10 is the most positive while zero is the most negative.

“We expect 12,000 units of new supply (private residential) in 2012 and 13,000 in 2013, including planned but not yet started projects,” said Gardiner.

“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 HDB demand trickle through into the private market.”

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