Based on the study conducted by DTZ, the Straits Times Index (STI) and the developers’ cumulative unsold inventory proved to be reliable indicators before major turning points for condo and private apartment prices in Singapore.
It was observed that the STI had been the leader in the non-landed private residential price index of the Urban Redevelopment Authority (URA) for a maximum of four quarters since 1993.
In Q3 of 2007 the STI reached its peak, nine months prior to the index peak of URA in Q2 of 2008.
In a similar manner, the developers’ cumulative unsold inventory for non-landed private homes has also reached its peak or bottomed between 2 to 12 quarters before turning points in the index of the URA.
DTZ also made a model of internal risk assessment to estimate probable major turning points in Singapore’s residential market.
The model showed the escalation of risk in engaging a correction phase since Q2 of 2008.
”Our assessment indicates that the probability of a full recovery by the end of 2009 – for the office and residential property markets in Hong Kong, China and Singapore – remains low”, said the real estate consulting group. ”Our internal model also indicates that the Singapore residential market has a higher chance of bottoming by mid-2010 (than by end-2009) and staging a gradual recovery from that point onwards”, added DTZ.
DTZ also reckons that both office markets in Singapore and Hong Kong have a lower chance of recovery by the end of 2010 than residential markets, as the office market has a more close correlation to the economic growth.
When asked if the recent rally of the stock market will result in a recovery of Singapore’s home prices, Chua Chor Hoon, senior research director of DTZ, said, “It’s too early to say if the stock market rally will be sustained. A lot will hinge on when the economy recovers”.