Based on a new research, buyers looking for homes these recent weeks could be heading to the market even before it has bottomed.
DTZ, a consultant for real estate, is expecting a gradual recovery in the property market by mid of next year. This view of the firm is based on a recent report from its forecasting unit in Asia. It shows how a recovery or slump in the stock market is often reflected in the property market. However, this only happens after one or several quarters.
In other words, the property market will not experience total recovery after a quarter, or even for just a year, after a recovery in the stock market occurred.
And many stock investors are aware that the Straits Times Index is down from its peak in 2007, although it has recently experienced slight increase.
“The STI reflects people’s view of the economy so its recovery will really depend on clear signs of an economic recovery,” said Chua Chor Hoon, DTZ consulting and research’s senior director.
Experts have noted before that when the stock market recovers, a recovery in the economy follows, and the property market will be next.
“It’s all co-related in one way or another. The stock market is usually the earliest indicator but it’s not hard and fast… its timing might be off,” said David Lum, analyst of Daiwa Institute of Research.
Last week, a six to nine percent contract in the gross domestic product was expected by the Government, higher than the earlier forecast of two to five percent contraction.
The study of DTZ also highlighted many unsold stocks from developers – another decline in prices and a probable recovery. It also showed that the residential property market has a high chance of reaching the bottom by mid-2010 followed by a recovery.
According to Mr. Lum, the property market has already adjusted so home seekers who recently bought properties wouldn’t have bought during the peak.
If prices continue to fall, buyers will not be glad, but they would’ve been at ease with the prices and won’t feel overstretched about their purchase, Mr. Lum added.
Brandon Lee, investment analyst of DMG & Partners Securities, believed the segment of the mass market would’ve bottomed out at a price range of $550 to $600 psf so buyers not need to worry.
However, people who purchased prime homes may have bought at an early time. Mr. Lee expects the property market reaching the bottom only in next year’s first half.
“Crises in the past have lasted for six to eight consecutive quarters and we are only half way through,” Mr. Lee said. “Further, equity markets are still volatile and prices have not reached the bottom for prime properties. Interest in prime property remains very subdued.”
Even though there is still hope for the property market due to the latest sales of new private homes, the market is still weak. Sales of new private homes in the first quarter reached 2,660 units, accounting to 62 percent of total sales for last year.