Sunday, March 6, 2011

Bumper supply is on the way for Singapore private property

Will Singapore private property prices fall in 2011? Or will they rise as it happened in 2009 and 2010 even after the 4th property market cooling measures? To understand the price direction of any asset, you need to look at supply and demand. All property cooling measures up to now targetted demand side of the equation, specifically the speculative demand. But under current economic landscape of the globe, it is really really hard to predict what will happen to demand. With an interest rate rise sure even the genuine demand will decline but when will the interest rates rise (they cannot fall further since they are already near zero and inflation devil is on the rise).

Supply side is more certain (although not completely certain) and it is regularly published by URA. URA quarterly releases the real estate statistics and below is from the latest release, Release of 4th quarter 2010 real estate statistics:
As at the end of 4th Quarter 2010, there was a total supply of 65,699 uncompleted units of private housing from projects in the pipeline (see Annex E-1). Of these, 32,776 units were still unsold. These comprised 3,528 units that had been launched for sale by developers and 10,400 units which had the pre-requisite conditions for sale and could be launched for sale immediately. The remaining 18,848 units with planning approvals did not have the pre-requisite conditions for sale (see Annex B-1). Details of the number of unsold private residential units with planning approvals in the 3 market segments are given in Annex B-2. 
Of the 65,699 units, 51,078 units were expected to be completed between 2011 and 2014, of which 36,950 units were already under construction8. Developers had obtained planning approvals9 for projects making up the remaining 14,128 units (see Annex E-2).
Below is a table compiled from URA data (the numbers include the property under construction or with planning approval).

Singapore Private Home Supply by Q4 2010
Locations 2011 2012 2013 2014 2015 Beyond 2015 TOTAL
City Center 3.874 2.579 5.325 4.162 4.266 660 20.866
City Fringe 2.265 2.760 5.704 6.982 790 0 18.501
Suburban 2.291 2.777 6.082 6.277 8.397 508 26.332
TOTAL 8.430 8.116 17.111 17.421 13.453 1.168 65.699

As you can see from the table, there is a property supply tsunami in 2013 and 1014 which are both significantly higher than the previous record of 14,000 apartments completed in 1998. According to The Straits Times, Ms Chua Chor Hoon from DTZ noted that "the figures can go even higher if the projects that get planning permission in the near future such as sites on the confirmed list of the government sales programme - are included":
Ms Chua's forecasts then suggest that 21,680 homes could be completed in 2014 and about 22,520 in 2015, with the total number of homes estimated to be completed from now until 2015 surging to about 78,300. 
Add in new Housing Board flats and the market could have a serious supply spike in two or three years, she added. 
The Straits Times - Home supply to spike in next few years
There is a real possibility of supply side pressure on the prices. If the interest rates increase with this supply background the prices will come down. But note that government plan to increase the Singapore population to 6.5 million and this additional 1.5 million can easily absorb all the supply if current foreign influx restrictions are eased. Also developers can slow completions, government can slow land release or even apply property heating measures if necessary. So as you can see supply is easy to see but demand is far from predictability.

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This blog article is to provide general information only and should not be treated as an invitation to buy or sell any property or as sales material.  Users of this report should consider this report as a one of the many factors in making their investment decision. Users should make reference to other sources of information and specific investment advice to obtain a more objective view of the property market. Asia Singapore shall not be responsible for losses suffered.

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