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Developers still gloomy about prospects

Despite slight uptick, real estate sentiment index remains under 5 in latest NUS-Redas survey

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Developer sentiment remains weak, according to the latest NUS-Redas Real Estate Sentiment Index, with the composite sentiment index remaining below 5.

Singapore

DEVELOPER sentiment remains weak, according to the latest NUS-Redas Real Estate Sentiment Index, with the composite sentiment index remaining below 5.

The index (which is a derived indicator for the overall real estate market sentiment in Singapore) inched up to 3.8 in the first quarter from 3.5 in Q4 last year. Correspondingly, the current sentiment index rose to 3.9 from 3.6, and the future sentiment index climbed to 3.6 from 3.4.

A score below 5 indicates deteriorating market conditions while a reading above 5 indicates improving conditions.

Associate professor Sing Tien Foo of the NUS Department of Real Estate noted that while there is a slight upturn in the current and future sentiment in the property market, the general mood remains weak as the sentiment scores still fall in the deteriorating range (below 5).

Developers were largely cool towards the government's stance to keep current property cooling measures in place. About 58.4 per cent of respondents indicated that property market conditions will worsen further, with 55.8 per cent saying the additional buyer's stamp duty (ABSD) and total debt servicing ratio (TDSR) dampen demand.

One of the respondents in the survey said: "Given that cooling measures have remained unchanged and the overall sentiment remains muted, the market is unlikely to be strong enough to withstand any increase in prices. Developers are likely to maintain or lower prices moderately to move units."

A third of the developers surveyed said they expect new launches to increase moderately while 52.8 per cent expect them to hold at the same level over the next half-year. About 13.9 per cent indicated that they would launch moderately fewer units, compared with 23 per cent in the previous quarter. On price changes, 47.2 per cent anticipate a moderate decrease in residential property prices in the next six months while 44.4 per cent expect prices to hold.

The three property market sectors with the lowest net balance scores are office, suburban residential, and prime retail. Current and future net balance percentages are used to indicate current and future sentiment about real estate development and market conditions in Singapore. They are based on the difference between the proportion of respondents who have selected the positive and negative options.

The office sector was the worst performing sector with a current net balance of -63 per cent and a future net balance of -69 per cent; the suburban residential sector has a current net balance of -50 per cent and a future net balance of -58 per cent; and the prime retail sector shows a current net balance of -64 per cent and a future net balance of -57 per cent.

In terms of potential risks, 84.4 per cent of respondents said they expect the global economy to slow down and 68.8 per cent said they expect job losses and declines in the domestic economy to adversely impact market sentiment in the next six months. A further 46.9 per cent foresee that the property market will face rising inflation, rising interest rates, and tightening of finance and liquidity.

They also warned that excessive supply through new property launches is a potential risk that will adversely impact market sentiment.