The expected rise in the supply of new HDB flats and private homes over the next few years will not lead to a housing oversupply in 2013 and 2014, according to an analyst from Citigroup.
Citigroup also believes that the current “severe shortage” of HDB flats is likely to offer support for mass-market prices and demand.
“We believe the prolonged period of under-building in the 2000s has resulted in the current severe housing shortage,” according to a report by Citi’s real estate analysts, headed by Wendy Koh.
“We estimate that the deficit in housing units is in excess of 50,000 currently and this undersupply situation will likely take several years to clear, just like the oversupply situation in the early 2000s.”
“With a severe shortage, we are not overly concerned about the rise in supply in both HDB and private residential units. A housing glut in 2013/14 is an unlikely scenario, based on our estimates.”
Contrary to the predictions of other analysts, the group’s forecasts indicate that the impending HDB supply and possible heightening of the income ceiling for new HDB flats will reduce HDB resale deals by seven to 15 percent, at most. It added that the impact on the private property market will be even smaller.
Ms. Koh also claimed that the shortage situation in the HDB market will support demand for and prices of suburban mass-market homes.
“Occupancy rate for mass-market properties are at an all-time high of 97.5 percent. With yields averaging at around 4.2 percent versus mortgage rates of just between 1.2-1.6 percent, investment demand for small units and mass-market units could remain strong,” she said.
However, the report warned that any additional price hikes or increase in volume in the mass-market sector may mean more property measures, as the government is watching the market closely.
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