While Singaporean home buyers continue to take a wait-and-see attitude, hoping for prices to fall further, in the meantime more private homes are being completed resulting in many units sitting empty.
Latest data from the Urban Redevelopment Authority (URA) shows that during the fourth quarter of 2014, there were 308,814 completed private units on the market, up 2.1 percent from 302,510 units available in the previous quarter.
Of that number, there were 24,062 units which were vacant in the quarter or 11.6 percent higher than the 21,569 vacant units in the previous three-month period.
In a statement, URA said the vacancy rate of completed private residences, excluding executive condominiums (ECs), climbed from 7.1 percent in Q3 to 7.8 percent at the end of Q4. Media reports stated this is the highest since Q4 2005 when a vacancy rate of 8.4 percent was recorded due to depressed rents.
Stock and vacancy of private residential units (excluding ECs)
Source: URA
The problem could get worse as there are many more uncompleted units in the pipeline. Although the total supply of uncompleted private homes decreased to 68,960 units in Q4 from 74,496 units in the quarter before, there are still 26,742 unsold units in this segment.
Based on expected completion dates reported by developers, the housing market will see over 20,000 private residential units being completed in 2015. Another 20,000 units will be ready in 2016.
According to Alice Tan, Research Head at Knight Frank Singapore, “a looming supply glut is expected to further exacerbate rising vacancy rates”.
Pipeline supply of private residential units and ECs by expected year of completion
Source: URA
To prevent a flood of empty homes on the market, developers chose to sell units from older developments last month instead of launching new projects, said analysts.
Despite this, only 230 units found buyers in December, the lowest monthly sales volume since January 2009 when developers moved 108 units. For the whole of 2014, developers sold 7,316 units, significantly lower than the 14,948 units in 2013.
“With market sentiment for private homes largely tampered by the existing property cooling measures and the Total Debt Servicing Ratio (TDSR) framework, developers would need to moderate prices and roll out attractive product positioning in order to move units,” noted Tan.
Meanwhile, the increased supply of completed private units is putting pressure on an already soft leasing market, revealed JLL.
The consultancy noted that the rental index fell by 1.0 percent in Q4 2014 and by 3.0 percent for the whole year. “Rents in CCR (Core Central Region) have fallen by 3.7 percent in 2014, more than the other segments as the higher rents in CCR become less affordable to tenants with tighter housing budgets,” JLL said.
Knight Frank’s Tan explained that with more housing options available, tenants are now very budget-conscious. “This has, in turn, resulted in a rising leasing preference for city-fringe locations rather than the city centre.”
Romesh Navaratnarajah, Singapore Editor at PropertyGuru, wrote this story. To contact him about this or other stories email romesh@propertyguru.com.sg
