Further Property Deflation Foreseen in 2009 (30 Dec 2008)

DTZ predicts 15%–20% decline (year-on-year) in the prices of condominiums and apartments in prime districts in 2009.

Official data for the fourth quarter of 2008 showed that the prices of non-landed private homes in high-end districts (including District 9, 10 and 11) plunged by 14% on quarterly basis, compared to 4.5% price declines in the last two quarters. Average prices of prime properties dropped by 21.6% year-on-year to $1,160, compared to $1,200 psf in the second quarter of 2007.

The prices of freehold non-landed houses beyond the prime districts fell by 9.3% on quarterly basis and by 10.5 % on yearly basis, whereas nationwide landed housing prices dropped by 5.7% on quarterly basis and 2.9% on yearly basis.

Prices began falling steeply following dismal sales of prime properties after the third quarter of 2008. Only 112 and 192 units were sold in October and November, respectively, compared to the monthly average of 444 units (based on sales record from January to September 2008).

According to DTZ, leasable prime non-landed homes also suffered from deflationary pressures, with monthly rents dropping by 9.4% on quarterly basis and 9.2% on yearly basis, hitting $4.36 psf. Non-prime rents fell by only 2% on quarterly basis, but increased 1.2% on yearly basis.

DTZ predicts that the economic slowdown will dampen the demand in the property market until 2009. Prices of luxury homes and mass residential properties are expected to fall by 43.8% and 32.1%, respectively, based on the 2007 benchmark.