There could be a decline in home prices and rents after the release of a large supply of new homes in the market in 2013 and 2014, warn analysts.
According to recent Urban Redevelopment Authority (URA) data, about 17,111 new homes are expected to be completed in 2013 and 17,421 in 2014, including homes under construction or already with planning approvals.
“These figures are considerably more than the record of 14,000 or so private apartments completed in 1998,” said Ms. Chua Chor Hoon, DTZ’s Head of Southeast Asia research.
She noted that the figures could increase if projects that obtain planning permission in the near future and sites on the confirmed list are to be included.
Ms. Chua’s projections showed that 21,680 homes could be completed in 2014 and 22,520 units in 2015, with the total number of homes estimated to be completed from now until 2015 surging to 78,300 units.
“Add in new Housing Board flats and the market could have a serious supply spike in two or three years,” she said. “Although there is increasing demand from singles moving out to live on their own and economic growth would mean more foreign workers needing accommodation, the supply will still be substantial.”
“The demand-supply imbalance is expected to lead to prices and rentals coming under pressure, especially if interest rates are higher the,” she added.
According to last month’s report by Nomura analyst Sai Min Chow, there may be a possible “supply tsunami” next year, signifying that 15,457 non-landed private homes are scheduled for completion in 2012.
The URA said that around 65,699 private residential units are expected to be completed by 2015, with 32,776 unsold as of the end of 2010.
Mr. Sai pegged the prime luxury segment in the city centre region to be the most vulnerable to price declines next year. He remarked that approximately 47 percent of the homes that will be completed this year are in that segment, which has already seen signs of rental weakness.
But experts believe that developers can adjust their completion dates in line with market conditions and the government can also lessen the risk of oversupply by slowing land releases.
Experts also noted that the URA numbers are only estimates. Accurate figures will appear closer to the year itself, as developers assess the market and firm up their plans.
Mr. Ong Kah Seng, Senior Manager of Asia Pacific Research at Cushman & Wakefield’s, added, “It is not certain that prices will soften in the next few years, even with the surge of completions.”
“If home-buying interest in that horizon can be boosted by an increase in an economically active population confident in financing private homes, the possibility of a supply overhang can be mitigated.”