Vacancy rate is a fundamental statistic

The Urban Redevelopment Authority (URA) issues data every quarter on demand and supply of the residential property market.

There were 16 extensions or annexes filled with many ratios, charts and other statistics in the 2009 Q2 release. Multiply this with the past releases, and the total number of data could truly be astonishing.

So what should people focus on these numbers? Considerably, it’s the vacancy rate. The key statistic should be examined by residential property buyers. The statistic can be seen in Annex E-1 of the release.

The amount of vacant units divided by the total amount of available units is the vacancy rate in Singapore. Originally, the URA expressed the vacancy rate in the reverse method, as the occupancy rate. This could be determined by dividing the amount of occupied units by the total amount of available units.

The vacancy rate is very significant due to the direct correlation between the prices and occupancy rate. For example, a fuller ‘Hotel Singapore’ would suffer higher rents, and therefore capital values. During the second quarter of the year the occupancy rate was 94.1 percent.

However, there is a tendency in the occupancy rate to change by two to three quarters due to prices. Therefore, the key is to know how vacancy rate changes. So how will the vacancy rate change in the next two years? The hints are in the HDB policy, URA data and the mechanics of demand and supply.

Since 1995, an additional of 8,100 private homes on average has been occupied, despite three terrible economic downturns, according to URA data. One must at least determine the figures next year with the recovering global economy.

This number may become higher due to the openings of the integrated resorts next year that will attract many tourists.

In spite of the many completions during the first half (H1) of 2009, the vacancy rate remains firm because the number of units occupied grew by  2,158 in the first quarter, 2,616 in the second quarter and 4,774 in the first half of the year.

This occurred in spite of the worst recession in Singapore since independence. Because of this, the prediction by a foreign investment bank, indicating that many foreigners will leave Singapore, is proven wrong. It is because of the driven immigrants why the fundamental demand is still strong.

The increase in the occupant population has been driven due to the growth in the number of permanent residents, according to the data released by the Singapore Department of Statistics.

From 2000 to 2008, the number of permanent residents (PRs) increased by 5.8 percent, while the number of citizens increased by 0.6 percent yearly. An average rate of about 22,000 PRs have been growing per year, thus, they need shelter to occupy at.

Based on the Annex E-2 of the URA quarterly release, there will be 5,233 completions on the supply side for private residences next year.