Is the upcoming supply excessive and will it result in an overheating housing market?
Up to 29 private residential projects could be launched between the second and fourth quarters of this year, supplying about 14,200 new units and raising concerns of an overheating housing market, according to a report from List Sotheby’s International Realty, Singapore.
The report analysed recent en bloc sales and Government Land Sales (GLS) sites, based on the assumption of a period of nine to 12 months for projects to be built on GLS sites to obtain all planning approvals before launching, and a longer period of 15 to 18 months for collective sale sites.
More: Developers’ En Bloc Appetite Diminishing: RHB
As such, the property consultancy identified 29 sites acquired by developers from mid-2016 to August 2017 that could be launched later this year.
The six sites in the Core Central Region are expected to yield 403 units, the Rest of Central Region’s 13 sites could generate 7,327 units, while 10 sites in the Outside Central Region could supply 6,460 units.
While the volume may seem high, List Sotheby’s believes it is not excessive.
It noted that developers launched an average of 15,400 units per year during the three years of recovery (2009 to 2011) following the sub-prime crisis in 2008. And based on Urban Redevelopment Authority statistics, the unsold inventory under construction (launched and unsold, unlaunched projects with planning approvals) held by developers stood at around 35,000 units.
But when demand picked up in 2017, the unsold inventory dropped to 18,900 units by the end of the year.
As such, launching about 15,000 units would not seem too ambitious for three reasons, it said. “Firstly, the market is now on recovery tract, similar to the period of 2009 – 2011. Secondly, developers had sold most of the units in existing projects and reduced the unsold inventory to a manageable number. Thirdly, developers will also likely pace their launches depending on their business strategies.”
Moreover, the current en bloc frenzy is expected to slow down in the near future as most of the developers have already built up a substantial land bank. “As the rate of acquiring sites slows down, it will allow time for developers to recalibrate the estimated supply by phasing the launches,” it noted.
The report added that demand will continue to be driven by low interest rates and liquidity.
“With the cooling measures still in place, end-users who form the underlying demand and investors holding a longer-term view of the market will make up the total demand.”
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Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email firstname.lastname@example.org