A HEFTY supply of new homes coming on to the market over the next few years could push prices and rents down, warn analysts.
The risky years look to be 2013 and 2014 when a record number of homes are expected to be completed, many on the plots of state land that have been sold in recent months.
There are expected to be 17,111 new homes completed in 2013 and 17,421 in 2014, according to a recent analysis of Urban Redevelopment Authority (URA) data. These include 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 DTZ's head of South-east Asia research, Ms Chua Chor Hoon. She noted that the figures go even higher if projects that get planning permission in the near future - such as sites on the confirmed list of the government sales programme - are included.
Ms Chua's forecasts then suggest that 21,680 homes could be completed in 2014 and about 22,520 in 2015, with the total number of homes estimated to be completed from now until 2015 surging to about 78,300.
Add in new Housing Board flats and the market could have a serious supply spike in two or three years, she added.
'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 then,' she said.
The bumper projections for 2013 and 2014 are even more striking given that an average of only 8,563 homes - including executive condos - have received Temporary Occupation Permits a year over the past 10 years, Savills added.
A report by Nomura analyst Sai Min Chow last month also noted a possible 'supply tsunami' next year, suggesting that 15,457 non-landed private homes are scheduled for completion next year, double official estimates.
There are 65,699 private residential units expected to be completed by 2015, with 32,776 unsold as of the end of last year, said the URA.
Nomura's Mr Sai pinpointed the prime luxury segment in the city centre region as being the most susceptible to price falls next year.
He noted that about 47 per cent of the homes that will be completed this year are in that segment, which has already seen signs of rental weakness.
But experts noted that developers can adjust their completion dates in line with market conditions. The Government can also reduce the risk of oversupply by slowing land releases.
And it is not out of the question that the market will be able to absorb the thousands of new homes given the fast-growing economy and population.
Experts also noted that the URA numbers are only estimates. Accurate figures will emerge closer to the year itself as developers assess the market and firm up their plans.
Cushman & Wakefield's senior manager of Asia-Pacific research, Mr Ong Kah Seng, added that 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,' he said.