Singapore could face an oversupply in the private residential market as a consequence of its population growth, which increased at its slowest pace in nine years reaching 5.4 million in June 2013, up 1.6 percent from 5.31 million during the same period last year.
Notably, the non-resident population rose just four percent compared to 15 – 19 percent over 2007 and 2008. This comes after employers hired fewer foreign workers in the non-construction sectors, according to the annual Population in Brief Report from the National Population and Talent Division (NPTD) of the Prime Minister’s Office.
Excluding foreign domestic workers, foreign employment growth in the non-construction sector fell to 3.5 percent from 7.1 percent in the previous year.
The slowdown in population growth combined with the more than 100,000 private homes to be completed between 2H2013 to 2017 could lead to higher vacancy rates, and, consequently, a decline in prices and rents, noted a Religare Capital Markets report.
“Simply put supply will continue to outstrip demand over the next few years resulting in a higher vacancy rate, which will pressurise rents and prices. As per our estimates, population per private unit will be below its long-term average by 2014-2015 and at its lowest, since at least 2000, by 2016, thus, suggesting a grim outlook,” the report added.
Religare “continues to remain negative on Singapore developers as rising vacancy rates combined with eventual fall in rents and prices could lead to lower new home sales going forward”.
“We continue to maintain our SELL call on City Development as the company remains highly exposed to Singapore residential market (35 percent of GDV), and will thus, bear the brunt of fall in prices and volumes.”
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
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