Private home prices are expected to weaken further this year but recover in 2017, according to consultancy JLL. It told a briefing this week that prices and sentiment in the last two years were akin to 2003 recession levels.
A slew of cooling measures implemented since 2010 has dampened buying demand and prices, which could have been 17 per cent higher if not for the measures, JLL noted.
Private home prices fell 3.7 per cent over the last year, following a 4 per cent decline in 2014.
"We expect prime and mass (market) prices to fall 5 to 10 per cent more before recovering in 2017," said JLL national director for advisory and research Regina Lim.
Its optimism stems from the still healthy wage growth, pent-up demand after years of weaker sales and the compelling value of property relative to that in major global cities. "If 2016 is still very lacklustre, buyers may decide to take action in 2017, and I am still projecting wage growth of 3 to 4 per cent," Ms Lim added.
JLL said prime residential property here remains attractive to investors as prices are 165 per cent lower than those in Hong Kong and 92 per cent cheaper than London's.
The introduction of the additional buyer's stamp duty since 2011 has weighed on the high-end residential segment, where prices have fallen about 20 per cent, JLL added.
Demand and rents for offices are expected to remain weak this year amid a flood of new supply coming onstream.
JLL estimates that 3.35 million sq ft of office space will be completed this year, of which 8.3 per cent have pre-committed leases. The projects to be completed this year include Marina One, Duo and Tanjong Pagar Centre.
"We expect demand to be between the 700,000 and 1 million sq ft mark, which is 35 to 40 per cent off the 10-year average of 1.3 million to 1.5 million sq ft," said JLL head of markets Chris Archibold at the briefing.
The lower take-up is largely due to weaker economic growth as well as lower demand from the financial sector, which occupies over half of the prime office space in the central business district (CBD).
JLL's review of occupancy among the top 20 foreign international banks in the CBD over the past 18 months showed that half have "either given up or have excess space". It added that the total excess space amounted to over 550,000 sq ft.
In view of the large supply pipeline, rents are likely to fall by another 10 to 15 per cent this year, after dropping 15 per cent last year, JLL projects. Prime office rent was $10.38 per sq ft per month, as at the fourth quarter of 2015.
Fears of a global recession, triggered by weak growth in China, plunging oil prices and the share market rout, may not deal additional blows to the office space segment as many of those risks have been taken into consideration.
"Most businesses have been relatively conservative on their occupancy probably over the last two to three years... There is a lot of pessimism, but many companies are still looking to Asean to grow," Mr Archibold added.