Singapore's home prices fell 2.1 percent in 2003, hit by a supply glut and a bad economy, official data showed on Friday, but some analysts expect a recovery this year after a 38 percent slide in prices from a 1996 peak.
The Urban Redevelopment Authority (URA), the government's real-estate planning body, said its advance index for private residential home prices slipped 0.2 percent in the October to December quarter after a 0.4 percent fall in the third quarter.
The stock market is already factoring in a recovery. Despite last year's fall, the fourth in a row, Singapore's property share market index jumped 38 percent over 2003 - beating a 32 percent rise in the Straits Times Index.
Nicholas Mak, associate director at property consultant Chesterton International, said Singapore's home prices stabilised last year as the rate of decline slowed each quarter.
Mak said smaller declines could still be expected in the January-to-March quarter, but stronger economic growth in 2004 should be enough to ignite a price recovery in Singapore, one of Asia's worst performing property markets in recent years.
Singapore's deflating property market contrasts with neighbours such as Thailand and Indonesia where home prices are rising. Even Hong Kong, where home prices are off 60-70 percent from a 1997 peak, is showing signs of recovery.
"All the ingredients for recovery are there," said Mak.
The fourth quarter's decline follows bigger drops of 0.4 percent in July-to-September, 0.6 percent April-to-June and 0.9 percent in January-to-March.
Analysts said the weakness reflected rising unemployment, a glut of new property, fragile consumer confidence and a spate of bankruptcies in Singapore, where economic growth of just 0.8 percent in 2003 was lower than any major Asian economy and less than half of its 2002 growth of 2.2 percent.
It also reflected a revamp in Singapore's pension scheme in October that cut contributions from employers to pension funds which home buyers often use to service their mortgage payments.
BRIGHTER 2004?
Most economists expect the island's $89 billion economy to grow by about five percent next year. Some stock brokerages such as DBS Vickers Securities say improving macroeconomic conditions - particularly rising employment - could ease the burden on homeowners and lay the groundwork for a 5-10 percent rise in home prices in 2004.
Property consultant Richard Ellis forecasts new home sales of 6,500 units this year, reflecting pent-up demand and low interest rates, after sales last year skidded to at most 5,000 units, about half of the 9,485 sold in 2002.
Still, some analysts are doubtful of any recovery this year.
Cazenove, a UK investment bank, recommends investors reduce holdings of CapitaLand and Keppel Land Ltd, and has downgraded City Developments and Allgreen Properties Ltd to hold from buy. The four companies are Singapore's top property firms.
Yasmin Wirjawan, an analyst at Standard & Poor's Rating Agency, said recently it would take almost three-and-a-half years to clear an estimated 42,000 units of private home property supply in Singapore, inventories that must be vastly reduced before prices start to rise.
The advance estimate is compiled from transaction prices given in caveats lodged during the first 10 weeks of the quarter, supplemented by information on the number of new units booked.
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