Prime time for prime property draws near

The first few months of next year will be the best time for prospective buyers and investors to enter the luxury residential property sector, according to Colliers Jardine.

The property consultant's conclusion is based on the prediction that the economy will recover in the second half and that the low interest rate environment will continue. Property prices are likely to see marginal growth next year despite more downward pressure in the first half.

Colliers said luxury residential prices had fallen more than 10 per cent this year and rental yields had edged up continuously despite easing interest rates.

The unusually wide gap between rental yields and interest rates had been one of the main attractions for luxury property investments.

It said that next year, interest rates would not be the prime focus as further cuts were unlikely.

Instead, the United States economy and local deflation would take centre stage.

Colliers said there was no consensus in the investment community on a recovery timetable because of the pre-emptive measures, massive interest rate cuts and fiscal stimulus packages by the US.

Property prices might go for a mild downward adjustment in the near term due to cautious market sentiment.

However, on the back of a second-half recovery in the US, the local property market would be able to hold up better.

It expected a further 25 to 50 basis point cut in the first quarter next year, and no quick rise in rates in the second half.

The Colliers analysis is different to recent comments by another prominent real estate consultant, CB Richard Ellis, which forecast a 10 to 12 per cent fall in rentals for luxury residential properties and a 5 to 7 per cent fall in prices next year.