While recent reports indicate that market sentiment has improved, Augustine Tan, president of the Real Estate Developers Association of Singapore (Redas), says he does not expect “runaway demand in sales transaction volume and property prices in the next few years”. Tan was speaking at the association’s Mid-Autumn Festival Lunch on Oct 4.
URA’s flash estimate for 3Q2017 shows a 0.5% increase in prices from the previous quarter, the first uptick after 15 quarters of decline that began in October 2013. About 8,400 new private residential units were sold between January and August and analysts estimate the total sales volume for the year to fall between 10,000 and 12,000. However, this is lower compared with the 15,000 units sold in 2013 and 22,200 units in 2012, notes Tan.
Private housing rents are still falling, declining 0.2% in 2Q2017, and vacancies remain high at 8.1%, says Tan. Newly completed units are adding to the supply even as MNCs are downsizing or hiring at a more cautious pace. Additionally, 15,000 units or 43% of the total supply of 35,400 uncompleted private residential units remained unsold as at 2Q2017, says Tan.
Tan also notes the stream of successful collective sales, with 17 enbloc sales as of September that can potentially yield 7,400 new residential units. Another eight developments that can yield about 5,700 units have started en-bloc proceedings, says Tan. This translates into approximately 13,000 units from enbloc sites that could be released for sale in 2018 and 2019.
Another 3,440 units were added to the supply from the six residential sites that were sold in the 1H2017 Government Land Sales programme, says Tan. The sites in the 2H2017 GLS programme could translate into a further 7,310 private residential units.
Land-hungry developers are buying land at increasingly higher prices. This has many risks and is not sustainable, says Tan. “Buyers are still price-sensitive. If the prevailing bullish appetite for residential land persists and demand is not sustained, it will hasten the compounding effects of increasing supply and high vacancy.”
While the residential property market appears to be on the mend and developers are aggressively replenishing their landbank, the length and amplitude of this new cycle is uncertain, says Tan. “The downside risks of geopolitical uncertainty, global economic activity and monetary policy tightening, coupled with domestic structural challenges to the economy and elevated unemployment rate, are ongoing concerns.”