Property Market Update

According to the NUS SRPI, the property market continued to stabilise in June, with no change in the overall index. Breaking the index into its components, the market is supported by transactions in the non-central region with a month-on-month increase of 0.7% while the central region and small units decreased by 0.9% and 1.4% respectively.

NUS SRPI for June 2012

The slide in prices in the central region looks poised to halt in the coming months, however, with fewer transactions reported with higher prices. As per our previous posts, I don’t think that central region prices can continue to erode as non-central prices rise. At some point, something’s gotta give, and I think it’s going to mean stabilisation and maybe a little upturn of central region prices, with normalisation of non-central transaction prices.

As for small units, I’m still looking for further price erosion in the next few months. I wish the SRPI would split the small units index into central small units and non-central small units. I’m pretty sure my previous prediction of non-central small units falling out of favour would be proven true.

Rental yield softened slightly quarter-on-quarter, with OCR rental yields decreasing more and central region rental yields stable. This is mainly attributable to the price increases in hot regions brought about by heady valuations in newly launched projects. I expect yields to stabilise in the next few quarters as price decreases exceed rental erosion.

Despite the bad news coming out of Europe, the Singapore stock market seems to have rallied quite well, with the STI exceeding the March highs and soundly trouncing the 3,000 psychological mark. I’m inclined to believe that some of the gains from the stock market will find their way into the property market and support the stabilisation effort.

In conclusion, from many angles, I would say that the next few months may see prices and rents flatten out and trade sideways. The buzzword for the next few months is “stable”.

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