Languishing real estate drags business sector into the red

Sectoral growth falls to -0.2% in 2Q16.

While the strong rental & leasing and professional services segments have boosted business sector growth, the weakening real estate has towed it from the surface, particularly the weakened private residential property prices at 0.4% in 2Q16.

The slip in the said prices is the eleventh consecutive quarter of decline.

"The still-soft real-estate market, despite showing some improvement in private residential property transactions, failed to support business-services growth," Edward Lee of Standard Chartered said in a report.

There is a silver lining, however, as the Ministry of Trade and Industry (MTI) has reported that sale transactions of private homes have improved as the market adjusted to lower prices.

Sales rose by 11% year-on-year, stretching the 7.2% increase in the previous quarter. 

However, it all ends there, as rentals remained dismal in the private retail space segment, declining by 3.9% on a quarter-on-quarter basis, extending the 1.9% contraction the previous quarter.

"This came as retailers continued to face challenging operating conditions, contributed by increasing labour costs and lacklustre consumer demand. In line with the subdued rental growth, occupancy rates dropped marginally to 91 per cent, as compared to the 92 per cent rate registered last quarter," MTI said in their report.

There seems to be a deterioration in the private office segment as well, as rentals decline by 3.5%.

Meanwhile, overall rentals in the private industrial space market also took a dive of 1.4%, pulling its 3% contraction last quarter.