Private home prices in Singapore is expected to grow modestly in 2020 amid resilient rental demand, according to property analysts and experts. Despite this, developers will face an uphill task of selling their units, given the high number of unsold private homes in the pipeline, reported The Business Times.
Data released by the Urban Redevelopment Authority (URA) showed that there are still 31,948 homes that remain unsold at the end of Q3 2019.
Assuming developers continue to sell around 9,000 private homes on average each year, take-up will be about 18,000 units in 2020 and 2021. Meanwhile, land from the confirmed list under the Government Land Sales (GLS) Programme is estimated to add around 3,000 private homes per year, or 6,000 units over the next two years.
The take-up numbers versus the GLS supply could likely result in a net reduction of about 12,000 units from the batch of uncompleted and unsold private homes.
“If the GLS continues to be conservative and outstripped by primary-market sales, we could see the figure fall to under 20,000 units by end-2021, potentially setting the stage for a market recovery,” said Ong Teck Hui, Senior Director of Research and Consultancy at JLL.
“If by then, Singapore’s economic growth has picked up and home-buying demand improves, that would pave the way for stronger growth in private home prices,” he added.
The last time the number of uncompleted and unsold units went below 20,000 was in 2017. The figure was 15,085 units at the end of Q2 2017.
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Slight growth expected for private home prices in 2020: Experts
The URA private home price index in Q3 2019 rose 2.1% from Q4 2018, with most of the property consultants expecting a full-year increase of 2 to 3.5%, which is slower compared to the 7.9% rise in 2018.
In year 2020, property analysts expect a more subdued growth for private residential property prices. Citing the Singapore Property Market Outlook 2020, PropertyGuru Singapore Country Manager Tan Tee Khoon predicts that “the current overhang of unsold units will be absorbed by the market within five years”.
Tee Khoon, however, cautioned that economic headwinds, slow population, employment and wage growth are factors that can affect demand and uptake, which has been positively influenced by this year’s favourable interest rate environment. He notes that this could yet change next year.
“My take is that private housing price growth in 2020 will be modest, between 2 to 4%, depending on economic condition,” said Tee Khoon.
Desmond Sim, CBRE head of research for Southeast Asia, has a bleaker outlook for the property market by predicting a 1% growth for the private residential property price index in 2020.
“Smaller units continue to be the main driver of sales. Due to high per square foot prices, home sizes are compromised to keep the absolute quantum palatable to buyers,” Sim said.
Higher agent commission will boost home sales: Industry insider
Observers also said that the take-up for newly launched condominiums in 2019 have been somewhat uneven. Developers’ willingness to reward agents is one key factor that affected the success of launches, aside from pricing, location and various differences.
“Commissions used to be less than 2% in 2017 before creeping up to 2-2.5% after the July 2018 property cooling measures,” noted an insider.
Property analysts predict that developers will move 9,200 to 10,500 private homes in 2019, an increase compared to 8,795 units in 2018. For 2020, their estimate hovers around 8,000 to 11,000 units.
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New Private Home Sales Higher in 2019, But Resale Transactions To Fall
While the number of private homes sold by developers in 2019 will be higher compared to 2018, resale transactions are expected to be lower.
Sim estimated the figure to be around 8,400 to 8,500 units this year, a reduction from last year’s 13,009 units. For 2020, he predicts the same figure to hit 9,000.
Temporary Occupation Permits (TOP) are expected to be issued for 7,933 private homes this year, compared to 9,112 units last year. Meanwhile, vacancy rate dropped to 6.1% during end-Q3 2019, compared to 6.4 from the previous quarter.
Regarding the lacklustre resale market, Tee Khoon noted that buyers are gravitating towards newly launched condominiums because of a few key factors. “Not only are newly launched private properties typically selling at a lower price quantum than resale, new launches also offer a deferred payment option that is appealing to buyers.”
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email firstname.lastname@example.org