How Long Will the Singapore Housing Supply Glut Take to Clear?  

Singapore property buyers have been spoilt for choice in the last couple of years. Thanks to a strong supply of private property and a relatively low take-up rate, property prices have remained relatively affordable, spiking only after the end of the Circuit Breaker due to pent-up demand, amongst other factors.

For buyers, sellers and investors trying to time their entry into the market, the future of the property supply is a key concern. Here’s what you need to know.

Since 2019, Singapore has been dealing with an oversupply of private housing which has kept prices depressed and created a buyer’s market. The housing glut has had developers hoping for an easing of cooling measures such as the 20% stamp duty levied on foreign purchasers.

Suburban neighbourhoods have been affected most strongly by the housing glut as they lack the pull factors that more central neighbourhoods rely on to boost demand.

The housing glut originates from the building frenzy in the boom years of 2017 to 2018, when en bloc activity reached a fever pitch, continuing until the government intervened in July 2018 with new cooling measures, including an increase of Additional Buyer’s Stamp Duty (ABSD) and a reduction of Loan-To-Value (LTV) limits.

From late 2019 to mid-2020, the non-landed private residential housing market saw a huge spike in supply. In Q4 2019, the Urban Redevelopment Authority (URA) published that there were over 30,000 uncompleted private residential units in the pipeline with planning approvals (excluding Executive Condominium) that remained unsold.

At the time, the news was flooded with reports on this supply glut and how it threatened to take up to four years to clear. That is still true, but encouraging signs have emerged. The private residential market has been booming since Q3 2020, and the oversupply has been somewhat mitigated by the increased take-up rate by buyers after the Circuit Breaker period in mid-2020.

Below are URA’s figures for the supply of new private residential units and the number of units sold.

Source: PropertyGuru, URA

As seen above, the number of new units in the pipeline that are sold each quarter started to increase in Q3 2020. In Q4 2020, it exceeded 2,000 for the first time, and in Q1 2021, actually went above 2,600.

It is also noteworthy that last year, as a response to the pandemic and the supply overhang, the Government also cut the supply of private residential housing by limiting confirmed Government Land Sales (GLS) sites. The supply of housing through GLS land sales has not been so low since 2009, when the government ceased to confirm new GLS sites in light of the global financial crisis.

Of course, despite dwindling numbers, there is still a considerable supply of unsold new private residential units. So assuming the market is able to sustain this upward trend in buying, how long would the remaining supply take to clear?

The housing glut will not last forever. The take-up rate for private housing has been improving steadily over the last five quarters. Coupled with a more restrained supply of new flats, the glut of unsold flats is steadily decreasing.

How long the housing supply overhang will last depends on the rate of home sales, which can be affected by numerous factors such as the COVID-19 pandemic and economic recovery.

Based on past sales figures and taking a conservative estimate of 2,000 units sold each quarter, it will likely take about 2.5 years for the housing glut to be cleared.

However, if the current market boom continues and average sales of 2,500 units per quarter are made, the housing glut can be cleared in two years.

Buyers have enjoyed extraordinary bargaining power in the past two years, but it looks like the days of plenty may soon be over.

As the housing glut is reduced over the next two years, sellers are likely to enjoy stronger bargaining power, which could push private property prices higher. Due to the government’s restriction of GLS sites and the slowdown in the number of en bloc sales, the years after the housing glut clears could see rising prices due to limited supply.

The Singapore property market has been experiencing an oversupply of private residential units since 2019 due to an earlier spike in en bloc sales in 2017 and 2018.

However, due to the government’s efforts to restrict the private housing supply such as by reducing the number of confirmed GLS sites, the housing glut is expected to be cleared in two to 2.5 years, after which the property market could experience strong price recovery.

This is, of course, unless the Government implements new cooling measures, but that’s another can of worms. You can read about it here: Should We Expect New Property Cooling Measures in 2021?

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This article was written by Joanne Poh. A former real estate lawyer, she writes about property and personal finance and spends her free time compulsively learning languages and roller skating in carparks.