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Daiwa downgrades property outlookIt predicts multi-year downturn that will slash private home prices by 22-26% in a 3-year periodBy FELDA CHAY19 November 2011At least one research house has turned thoroughly negative on Singapore’s private property sector, predicting that it will see a multi-year downturn that will slash private home prices by between 22-26 per cent within a three-year period.Daiwa Capital Markets’ David Lum and Tony Darwell believe that a potent mix of factors such as an economic slowdown and a build-up in unsold inventory in the primary market will hit the private homes market here, and have downgraded their outlook to negative from neutral in a Nov 16 report.They are among the most bearish of analysts covering the Singapore property market.Others have expressed similar concerns about the uncertain economic climate and jump in unsold inventory, but most have not turned so decidedly pessimistic.Nomura, in a report released yesterday, said that inventory build-up is expected to increase further and is a ‘key risk’, but did not make the cuts on the sector that Daiwa did.Citibank, in its Property Insights report on activity within the sector in the third quarter, said that ‘if the global outlook worsens and the economy continues to slow down, this will eventually affect buying sentiment and lead to less exuberant purchase activity’.Daiwa believes that the build-up in unsold inventory ‘would reach record levels’ and ‘would keep home prices . . . in check for several years’.It based its prediction on the currently high unsold inventory level, and a forecast influx of new supply that together will flood the market.Already, new private housing supply at the end of September hit the highest level since pre-global financial crisis levels at 86,332 units, noted Daiwa.It added that just 43 per cent, or 37,114 of these units have been sold.‘This implies that developers still have to sell (or launch eventually) the remaining 49,188 unsold units’, of which 11,480 are under construction while the others are ‘planned’, said Daiwa.‘Although developers have the flexibility to hold back the launches of private land projects, GLS (government land sales) sites awarded to developers would have to be launched for sale eventually (the typical stipulated project completion period is 60 months from the award of the site, after which the government would impose onerous penalties for slippage).’It believes that the unsold inventory of private homes totalled 12,035 units as at end-September, which is nearly back to figures seen during the peak of the global financial crisis at the end of March 2009.Its estimate took in unsold units in completed developments, those that were launched for sale in uncompleted developments but were not sold, and the remaining unlaunched units in uncompleted developments which have been partially launched.‘But unlike the previous peak, the build-up this time has been due to a rapid increase in units launched . . . and not a collapse in demand,’ it said.Daiwa also expects considerable new supply to hit the market, with between 12,043 and 17,000 new private homes likely to be completed annually from 2012 to 2015.‘The robust pipeline of completions for 2012-2015 is a reflection of record home sales in 2009-2011, as well as the record new supply injected in recent GLS announcements,’ said Daiwa.Its forecast for new private homes is lower than the Urban Redevelopment Authority’s (URA), which project that 12,043 to 25,593 new houses will be built annually from 2012 to 2015.Daiwa’s negative view of the local property market comes after figures from URA released on Tuesday show that private home sales fell 15 per cent in October from September - although property consultants said that transactions in October were still relatively strong given the spike in sales that September drew.
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