The office sector is bracing for weaker demand over the next two to three years, according to DBS, in a Singapore Business Review report.
Earnings growth will also slow down, as office rents correct and residential sales taper off, said the report.
DBS expects a lower residential sales volume, noting that the risk for a medium-term structural imbalance has increased due to the recent move to clamp down on investment demand, together with the anticipated increase in completed new housing inventory.
“We estimate that an average of 33,434 units of housing could enter into the market annually between 2012 and 2015 or 3.5 times the average over 2004 to 2010,” DBS said
However, it believes that the possibility of a sharp price correction at this point is still low, considering that both developers and individuals have strong holding power over an extended low-interest rate environment.
In line with this, private home prices have been predicted to dip five percent this year, while primary volume demand will slow from 16,000 units to about 11,000 to 12,000 units.
In the office sector, the uncertain global macroeconomic climate may lead to “weaker appetite for office space and rising commercial supply over the next two to three years.”
From the estimated two million sq ft take-up for this year, DBS predicts 2012 office demand will soften to 1.2 million sq ft.
Office rents could also correct by 10 to 15 percent as office values depreciate by up to 10 percent.
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