Tidal wave of property supply hits S’pore (Oh dear)

[vboy]

Tidal wave of property supply hits S’pore
BY
KU SWEE YONG
[email protected]
PUBLISHED: 4:04 AM, SEPTEMBER 19, 2014
(PAGE 1 OF 1) - PAGINATE
Investors should sell their residential investments in Singapore. The property market, which has been gradually declining, does not need any new action to tip it over. Just the sheer number of new homes being supplied both in Singapore and Iskandar will drive prices lower.
New private home sales in Singapore have plunged in the past three months to about 40 per cent of the monthly average of the past five years or so.
Since January 2010, the average number of homes sold by developers each month has exceeded 1,300 units. The total number of new homes sold in June, July and August were 531, 560 and 490, respectively, including executive condominiums (EC). Excluding the hybrid housing type, the respective numbers were 482, 509, and 432, respectively, Urban Redevelopment Authority (URA) and Century 21 (IPA) data showed.
Given seasonal factors, such as the Hungry Ghost Month and the quadrennial football World Cup, the three months of dismal private home sales will not be sufficient to render the residential sector a bear market. However, the downward trend can be confirmed by several other indicators.
The Housing and Development Board (HDB)’s resale price index, which has a direct impact on mass market private properties, has fallen 5.4 per cent over the past four quarters.
During the same period, the URA’s private residential price index slipped 3.4 per cent. The weakness is also reflected in the rental market, where median private non-landed rentals eased 1.1 per cent in the past four quarters to S$3.79 psf per month. Meanwhile, private residential occupancy rates fell to 92.9 per cent in the second quarter of this year from 93.9 per cent in the third quarter of last year. In absolute terms, the number of vacant units increased to 21,268 in the second quarter of this year from 17,459 in the third quarter of last year.
Taken together, it is evident that we experienced a slow decline over the past year. Will this gradual weakening lead to a soft landing? Or are we about to fall off the edge of a cliff? As a practising real estate agent, I find it tougher to hold up high rents for landlords. With the rising vacancy rates amid a stream of newly-completed properties, the competition for tenants is intense, especially with the Government tightening foreign employment.
Although some landlords have yet to tune themselves to this new reality, others have reacted quickly ahead of next year’s record high supply, which will further pressure rents.
Supply of HDB, EC UNITS and Private Residences
In the past 10 years, Singapore has added about 8,000 new private residential units per year. But next year, we can expect about 22,000 units to be completed and 24,000 the year after and at least 16,000 in 2017. The pressure on rents will be overwhelming. Lifting the property curbs will not help fill vacant apartments and improve rents.
The expected supply of new HDB flats and ECs is large as well. More than 25,000 units will be completed every year over the next three years. There are also many second-time new HDB buyers and those who are upgrading to ECs who are required by law to sell their current HDB flats when they collect the keys to their new flats or ECs. Unless a few of the cooling measures are lifted and the foreigner employment policies are relaxed, the HDB Resale Price Index and the URA Residential Price Index are set to decline at a faster pace with the onslaught of new, completed home completions, even after taking into account the need for infrastructure to keep pace with population growth.
Supply in Iskandar
We must also not forget the promise of lower-cost properties across the Causeway in Iskandar.
The numerous Iskandar residential projects launched in Singapore since 2010, in locations such as Puteri Harbour, Danga Bay, Tebrau, Medini, etc, are now being completed.
They are ready to compete for tenants from Singapore seeking to reduce their housing costs and who do not mind making the commute between the countries. I estimate that over the next four years, about 10,000 new homes will be added per year in Iskandar and some of these will find tenants from Singapore with their attractive rents.
In the past six months, there has been an increase in the number of mortgagee home sales, with several headline-grabbing ones involving luxury condominiums in Sentosa Cove and the prime District 9. During the luxury property boom from 2006 to 2008, about 60 per cent of top-end apartments were purchased by foreigners. Some have held on to their investments, but they are now feeling stifled as a result of the multiple rounds of cooling measures, weak property demand and the restricted ability to refinance under the current regime.
For those who are willing to take a long-term view, say, 15 years and beyond, landed homes and high-quality freehold properties in Districts 9 and 10 would remain safe bets as these sub-segments are limited in terms of current stock and future supply.
As for now and the immediate future, as I forecast in a commentary in this column last year (“The price war has begun”, Nov 8, 2013), sellers are lowering prices and this will continue to take its toll on investors.
I recommend that investors sell their residential investments before they are engulfed by the tidal wave of new supply.
ABOUT THE AUTHOR:
Ku Swee Yong is a licensed real estate agent and the chief executive of property agency Century 21 Singapore. An author of two bestsellers, Real Estate Riches and Building Real Estate Riches, he has just launched his third book, Real Estate Realities — Accommodating The Investment Needs Of Today’s Society.

[Leeds]

Mr Ku Swee Yong is one of the every few real estate professional whom I respect and bother to read his analysis. The market data provided by Mr Ku is in line with the government's social and economic policy which I had emphasised in 2011 and 2012.

In 2011, I made my call based on my understanding of the social and economic fundamentals and suggested that those who own multiple property might want to sell some of them. I made the same call in 2012 much to the agony of many forumers here who were mainly multiple property owners or real estate agents. I was pretty quiet in 2013 and 2014 cause the market was adjusting to new realities.

For those who are higher leverage and had sold some of their holding, good for you. You now have more options with your investments.

For those who are still holding on to your prized assets may want to consider to sell now even if you make less profits. This may well be last chance to sell and probably the best option especially if you are higher leverage. You should not be too concerned that once you sell you now you cannot buy back because of the cooling measures. When the market turns dire, some of the cooling measures will surely be removed. The question is whether you dare to buy when the market turns dire.

For the fortunate few who have the holding power to hold on to your assets, good for you too. The only thing that you will need to experience is the "pain" of watching the values of your assets declining. You should go through the cycle unhurt because you can accept lower rental even if it cannot covers the loan payment. Not many people can be in this position.

Most savvy investors had QUIETLY liquidated their assets in 2011 and 2012 when the sales volume started declining. They might not have sold at the highest peak, they just knew when to take profits.

With interest rate hike expected in 2015 coupled with the supply meeting or exceeding demand and the lack of speculative play, the market will consolidate further down the road. Hopefully, property prices will be more in line with income level which is what the government has been trying to achieve these years through various cooling measures.

Property investment is for long term. Your investment horizon should be at least 10 to 15 years. However, if you do not have too many 10 to 15 years with you, you should be even more careful with your next purchase.

[Kelonguni]

Mr Ku Swee Yong is one of the every few real estate professional whom I respect and bother to read his analysis. The market data provided by Mr Ku is in line with the government's social and economic policy which I had emphasised in 2011 and 2012.

In 2011, I made my call based on my understanding of the social and economic fundamentals and suggested that those who own multiple property might want to sell some of them. I made the same call in 2012 much to the agony of many forumers here who were mainly multiple property owners or real estate agents. I was pretty quiet in 2013 and 2014 cause the market was adjusting to new realities.

For those who are higher leverage and had sold some of their holding, good for you. You now have more options with your investments.

For those who are still holding on to your prized assets may want to consider to sell now even if you make less profits. This may well be last chance to sell and probably the best option especially if you are higher leverage. You should not be too concerned that once you sell you now you cannot buy back because of the cooling measures. When the market turns dire, some of the cooling measures will surely be removed. The question is whether you dare to buy when the market turns dire.

For the fortunate few who have the holding power to hold on to your assets, good for you too. The only thing that you will need to experience is the "pain" of watching the values of your assets declining. You should go through the cycle unhurt because you can accept lower rental even if it cannot covers the loan payment. Not many people can be in this position.

Most savvy investors had QUIETLY liquidated their assets in 2011 and 2012 when the sales volume started declining. They might not have sold at the highest peak, they just knew when to take profits.

With interest rate hike expected in 2015 coupled with the supply meeting or exceeding demand and the lack of speculative play, the market will consolidate further down the road. Hopefully, property prices will be more in line with income level which is what the government has been trying to achieve these years through various cooling measures.

Property investment is for long term. Your investment horizon should be at least 10 to 15 years. However, if you do not have too many 10 to 15 years with you, you should be even more careful with your next purchase.

Thanks. Can feel your sincerity. I think all these trauma could have been avoided for the heavily leveraged if the Govt had put the last CM as the first one.

Good luck to all.

[henryhk]

Thanks. Can feel your sincerity. I think all these trauma could have been avoided for the heavily leveraged if the Govt had put the last CM as the first one.

Good luck to all.

I have confidence in Singapore, the market is as good as it is.... Tose who sell will later keep asking wen can buy.....didnt drop enough , and age catching up, can't buy.... I know many younger colleagues are wondering when to buy their first pte, either go jb buy or doing decoupling to get the big C.....nver ends...

[Thermofisher]

Can I expect fire sales rally?!!!:cupcake:

[k00L]

Mr Ku says D09/10 freehold can hold
Landed can hold

The rest can sell, OCR storm coming. 1700psf Jgateway beware!


For those who are willing to take a long-term view, say, 15 years and beyond, landed homes and high-quality freehold properties in Districts 9 and 10 would remain safe bets as these sub-segments are limited in terms of current stock and future supply.

[Arcachon]

Sell than put your money in the Bank, then the Bank print more money and give you more interest is it.

[Leeds]

Thanks. Can feel your sincerity. I think all these trauma could have been avoided for the heavily leveraged if the Govt had put the last CM as the first one.

Good luck to all.

Thank you for your kind words.

For discussion sake, if the last CM (TDSR) had been the first, foreign buyers/investors would be buying up and the locals would protest.

Under current "cheap money" environment, there is a need to stop rich foreign buyers from inflating local asset prices first. The locals would jump in if they see asset price rises beyond their mean. Hence, the last CM was to prevent the locals from getting hurt down the road.

I think the last CM has served its purpose and save quite a lot of people from buying into inflated assets.

[Yuki]

After doing my own research. ...I have another perspective. The massive property supply is probably indicative of the huge amount of liquidity that will still be around in the next few years.

By building in anticipation of the demand doubtlessly fuelled by cheap money is the only way to stabilise the prices.

The government perhaps know some thing we don't. Never trust what we read from the papers. Its only the half truths anyways n not the whole picture.

[lajia]

U already know....:) not many can see, and the mass will only see that the supply and the cms will bring the market down. Is this also what the garmen want to achieve? Yes of course, to a certain extent. Why, because they know when to do what, we don't know....
If u can expect what is going to happen next year, u think Mr K and those scholars eating shit, don't know that will happen?

My opinion is, very soon, the gate will be open, the cms will be lifted, and the additional supply will be well absorbed. In this way, it strike a balance to prevent a surge in price and stabilise the market.
:) we shall see....very soon.


After doing my own research. ...I have another perspective. The massive property supply is probably indicative of the huge amount of liquidity that will still be around in the next few years.

By building in anticipation of the demand doubtlessly fuelled by cheap money is the only way to stabilise the prices.

The government perhaps know some thing we don't. Never trust what we read from the papers. Its only the half truths anyways n not the whole picture.

[Arcachon]

After doing my own research. ...I have another perspective. The massive property supply is probably indicative of the huge amount of liquidity that will still be around in the next few years.

By building in anticipation of the demand doubtlessly fuelled by cheap money is the only way to stabilise the prices.

The government perhaps know some thing we don't. Never trust what we read from the papers. Its only the half truths anyways n not the whole picture.

AEC 2015

[Yuki]

AEC 2015

I read up on this... Implication wise might take years to materialise n effects felt. Hence the impact might not be so immediate

immediate. I.E policy wise moving in the right direction
But implementation wise need a few more years.

Perhaps the still low low interest rates will fuel the market more? .