Home prices to dip 10 to 20%: OCBC

OCBC sees residential prices will dip ten to 20 percent over 2014 to 2015.

However, a price crash in excess of 20 percent is unlikely, even after accounting for the anticipated physical oversupply and interest rate uptrend ahead, according to a recent OCBC report.

"One key argument against a crash is that we believe there is a high price elasticity of demand in the market largely due to a prolonged period of physical undersupply from 2004 to 2012. Simply put, significantly more buyers will likely come into the market at lower price points, which will slow the rate of decline as prices soften," the statement said.

Despite the strong sales recoded in May, the report pointed out the take-up rate of 82 percent in the month was lower on a month-on-month and year-on-year basis, as figures for April 2014 was at 125 percent while May 2013 stood at 97 percent.

Additionally, OCBC's base case is that primary sales for the year will fall: "We forecast FY 14 primary private home sales to dip 33 percent to 10,000 units, and see prices in mass market segment to be more at risk versus the mid-tier and high end."

Muneerah Bee, Senior Journalist at PropertyGuru, wrote this story. To contact her about this or other stories email muneerah@propertyguru.com.sg

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