First drop in industrial property prices in 3 years

INDUSTRIAL property prices fell unexpectedly in the last quarter of 2012 – the first decline in three years and a sign that caution is taking hold among investors.

Prices fell 0.7 per cent compared with the previous three months after climbing for 12 straight quarters, according to the Urban Redevelopment Authority (URA) yesterday.

Overall, the URA industrial property price index rose 25.8 per cent last year from the preceding year, lower than the 27.2 per cent year-on-year increase in 2011.

The index is now 14per cent above its previous historic peak in the first quarter of 1997.

Analysts said industrial prices could moderate this year due to the seller’s stamp duty imposed on the sector two weeks ago. Read more about the latest property cooling measure here.

The overall price decline in the fourth quarter surprised experts, as values for multi-user warehouses shot up 9.4 per cent over the same period from the preceding three months.

That increase was likely due to limited supply, said Colliers International research and advisory director Chia Siew Chuin.

Knight Frank senior manager Alice Tan added that demand for warehouses with the specifications demanded by logistics firms outstripped supply, particularly in the eastern part of Singapore.

The rise in warehouse values was outweighed by a surprise 2.7 per cent sequential decline in prices of multi-user factories after they rose a sharp 10.1 per cent from the second quarter to the third.

Analysts said factory demand could have softened due to a weaker economic outlook.

Manufacturing output has fallen sequentially for the past three quarters and anticipated factory orders have shrunk every month since July.

Ms Chia said investors may have been reluctant to buy as they were unsure about whether they could find tenants following a clampdown last year on unauthorised use of industrial space.

Stiffer competition due to a spate of new industrial launches also led developers and sellers to lower their price expectations.

But while industrial prices fell, rents rose 3.9 per cent in the fourth quarter from the preceding quarter, outstripping the 1.2 per cent quarter-on-quarter rise in July through September.

“Should prices and rents continue to diverge, more industrialists could be steered to own industrial properties as opposed to leasing,” said Ms Tan.

Analysts said they expect industrial prices to moderate or flatten in the short term, due partly to the seller’s stamp duty.

Analysts also flagged a possible oversupply this year and in 2014.

They pointed to the URA’s quarterly report yesterday which said that 31.2 million sq ft of new supply will come onstream this year and 15.6 million sq ft next year.

Noting that total new demand last year for factories and warehouses combined was only 9.1 million sq ft, Ms Tan said she expects industrial prices to fall by 5 per cent to 10 per cent this year.


Source: The Straits Times, 26 Jan 2013

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