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)
Property experts are expecting an oversupply in the local residential sector from 2014 if the global and domestic economies do not rebound back and curbs on foreign buyers for private residential sales continue to remain un-reviewed.
Private home prices in Singapore are expected to drop by up to five percent due to an oversupply of residential properties from 2014 onwards, said Kwek Leng Beng, Executive Chairman of City Developments Limited (CDL) according to an article in Chinese newspaper, LianHe ZaoBao
“I don’t believe for a moment the market will collapse, but I believe it can go down. I believe the government is astute enough that by 2015 or thereabouts, it may possibly remove some of the (cooling) measures – because 90.2 percent of Singaporeans own property and it is not their intention to crash the market.” said the Executive Chairman of City Developments Limited (CDL) , second largest developer in Singapore.
City Developments (CDL) also said it is not looking to put in top-dollar bids on land tenders just to grow its land bank in Singapore. This is due to the so-called “qualifying certificate”, which requires developers of high-end residential projects to sell their new homes within two years.
CDL’s Executive Chairman Kwek Leng Beng said: “It will be suicidal to keep on tendering land at high prices and you know (it is) just because you want land bank. It’s not the policy of our company to keep tendering land at the high prices.”