In a speech at a seminar organized by the Real Estate Developers Association of Singapore (REDAS) on July 7, REDAS president Augustine Tan says, “It’s still too soon to indicate that the property market has finally turned positive and that recovery has kicked in.”

This is despite a pick-up in the property market since March after the government reduced the sellers’ stamp duty period from four to three years, buoyant new home sales in 1H2017 and active participation by developers in the recent government land sales.

Tan cautions that the weak macroeconomic fundamentals, anaemic global growth, geopolitical risks and rising US interest rates are still cause for concern. “If the prevailing 'bullish' appetite for residential land persists amid pending rising interest rates and weak employment prospects, demand will weaken over time and hasten the compounding effects of increasing supply and high vacancy,” he adds.

The supply overhang of uncompleted private residential units is 37,000 as at 1Q2017, of which nearly 16,000 or 43% are still unsold, according to REDAS data. Based on the 2016 new residential sales volume of 8,000 units, it will take two years to absorb the existing stock, barring unforeseen circumstances, reckons Tan.

On June 29, the government announced it will release land for approximately 8,125 private residential units under the 2H2017 Government Land Sales (GLS) programme. Tan notes, that quite a number of the sites being offered are in attractive locations.

In addition to the GLS sites, the successful sale of One Tree Hill Gardens, and the two privatised HUDC estates of Rio Casa and Eunosville, have also revived interest in collective sales. There are about 25 potential collective sale sites in the pipeline, which will boost future supply.

Tan warns, that the rental market across all property sectors is also not doing well. As of 1Q2017, the vacancy rate for completed private residential units improved marginally to 8.1% from 8.4% compared to the previous quarter. Meanwhile, demand for space in the commercial and retail sectors have also dipped. The vacancy rate for office rose to 11.6% island-wide in 1Q2017 from 11.1% in 4Q2016, while vacancy rate for retail rose to 7.7% in 1Q2017 from 7.5% in 4Q2016.

“Against this backdrop, business and consumer confidence could be weakened, further dampening investment and consumption,” says Tan.