Home prices could fall by as much as 20 per cent by the end of 2015 due to oversupply, tougher loan rules and rising interest rates, say analysts. The property market may be nearing a breaking point as Government cooling measures and increased housing supply put pressure on prices while a potential spike in interest rates is set to further dampen demand, Barclays’ economist Joey Chew warned. It does’t need a genius to predict what’s gonna happen if there is a increase in supply and reduce in demand. No prize for correct answer!
URA’s Research shows that vacancy rate for private residential properties is increasing. Currently at 5.6% for 2Q 2013, which translate to about 15,833 units. This sudden inflation in the number of vacant units could result from many newly completed mass-market projects in the past few months. Expected the vacancy rate to increase further as wave after wave of new residential properties will be completed in near future till 2016. Historically, when vacancy rate hits 8%, rents and prices tend to start declining.
( * The vacancy rate is the percentage of the existing stock that is vacant and is based on surveys carried out by URA. Due to the large number of private residential units, the survey on their vacancy rate is conducted on a random sample basis every quarter. The vacancy of the sampled private residential units is inferred from the consumption levels of water and electricity as recorded by the Power Supply and field visits are carried out for doubtful cases. )
The risk of a major property price correction in the next two years is emerging. Housing supply is also reaching a record high, with 120,000 private and public homes coming on stream in the next three years. A bubbly housing market is harmful for our economy because household and banks’ exposures to the property market are higher today.
However, I believe that when price start to adjust, government may remove some restrictions on the existing cooling measures in order to stimulate the market. New buyers and up-graders will come into resale market again and thus push up the transaction volume. And the cycle repeat. History always repeat itself don’t they?Source – Straits Time, URA, Barclays
- HDB median cash premiums hit 4-year low in Aug 2013 (paulngproperty.wordpress.com)
- More HDB resale with $0 COV (paulngproperty.wordpress.com)