Thursday, January 24, 2013

Injection of 200,000 homes unlikely to cause price crash


PropertyGuru.com.sg
Jan 24, 2013

The government recently announced a steady supply of residential units in the next four years that will provide more housing options for Singaporeans.

In his blog post last week, National Development Minister Khaw Boon Wan said around 200,000 new homes comprising HDB flats, private properties and executive condominiums (ECs) will be built by 2016. This is equivalent to building four new Ang Mo Kio towns.

According to Chia Siew Chuin, Director of Research and Advisory at Colliers International, the units will be built all across Singapore, with HDB flats equally distributed across mature and non-mature estates. Meanwhile, most private homes will likely be constructed around Bedok, Bukit Merah, Bukit Timah, Hougang and Geylang.

With such a large housing stock coming up in the next few years, there are concerns of a possible oversupply. According to data from the Urban Redevelopment Authority (URA), there were a total of 83,975 uncompleted private residential units from projects in the pipeline as of end Q3 2012, of which 36,606 units remain unsold.

But Chia said a housing glut will depend on several factors such as “demographic and economic fundamentals of family formation, upgrading and rising affluence which can support demand, and consequently, absorb pipeline supply”.

The possibility of an oversupply may also depend on the government’s stand on immigration policies – foreign labour, citizen and permanent resident policies – that will affect housing demand and the leasing market.

Meanwhile, the injection of new homes is unlikely to have a drastic impact on private housing prices. Chia said: “While prices are not expected to crash, the price increases should plateau and perhaps see some moderate decline, as developers grant discounts to move their units in a competitive environment.”

“Overall for the year, barring (a) major catastrophe of Lehman crisis proportions, private home prices are expected to remain relatively stable with marginal downside, if prices slip at all.”

She added that the market will be supported by fundamental demand from consumers buying for owner-occupation.

“However, if interest rates should increase as pointed out in Minister Khaw’s blog, the fundamentals driving the residential market would take a more cautious turn. Adverse external factors of a Lehman-like crisis would also bring an abrupt change in buyer sentiment.”


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