Are Private Property Prices Really Falling This Time?

The URA Private Property Price Index (PPI) registered a decline in the last quarter of 2013. Analysts are saying again that prices are starting to ease. They said that in 2012 Q1 when the PPI eased 0.1%. But the PPI rose in 2012 Q2, confounding many.

So is the fall in PPI for real this time?

My take is YES.

Let's take a look at the table below. In 2008 Q3, flash estimates showed a 1.8% decline in PPI. This accelerated to -2.4% when the actual figures were released one month later. This increased expectations that prices will fall further which was proven in 2008 Q4.

In 2012 Q1, the flash estimates and actual figures were the same. What happened in 2012 Q2? The PPI rose instead of falling further.

This time in 2013 Q4, the actual PPI fell more than the flash estimates. This has raised expectations that prices will continue to ease in 2014 which I also believe so.

Period	Flash Estimate	Actual
2008 Q3	-1.8%	-2.4%
2008 Q4	-5.7%	-6.1%
2012 Q1	-0.1%	-0.1%
2012 Q2	0.4%	0.4%
2013 Q4	-0.8%	-0.9%

Source: URA, Real Property Advisory

The key point to note is if the actual figures were higher/lower than flash estimates, the chances of the PPI continuing in the same direction is higher. ie. if the actual figure is lower than flash estimates, the next quarter is likely to be lower.

In 2014 Q1, we have already seen property launches at prices equal or even lower than comparable projects in the same area. Even land bids for executive condominium sites are tempered. This means that developers are managing their costs in case property prices fall further.

Whatever it is, we will know how property prices fare in two months time.