Can Singapore fill up its empty homes?

Singapore has a problem of surplus, at least in the real estate market. PropertyGuru released its Property Market Outlook that estimated around ten thousand new private homes to be completed this year. This follows the twenty residential projects worth more than six billion dollars that were sold to developers through 2017. Analysts and market watchers are uncertain if the availability of so many new properties is going to create an imbalance. The property market already has a problem of increasing supply and decreasing demand.

The residential projects that are categorized as en bloc developments along with new private homes will account of around twenty thousand new units. Singapore already has a block of ten thousand units and counting that remain unsold at the moment. The population growth in the city state had slowed down through the five year period from 2007 to 2012. The three percent growth has further slowed down to barely one percentage point from 2013 through 2017. Clearly, there is a significant drop in demand and the new inventory will have a serious impact on rentals and vacancy rates.

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The vacancy rate in the Core Central Region was pegged at eleven percent for the third quarter of last year. It had already put substantial pressure on the rental prices in the city. The vacancy rates in the Rest of Central Region and Outside Central Region are not encouraging either. They stand at a little more than eight percent and seven percent respectively. The historic average for vacancy rates was around six and a half percent. That has been breached owing to the surplus, resulting in empty homes. The average vacancy rate stands at eight and a half percent right now.

2018 may witness a rollout of as many as twenty two new projects. The land prices are on the rise, the market is expected to recover, the prices of newly constructed private homes are going to be much higher this year and vacancy rates are expected to remain stagnant or may increase. None of these factors will help to fill up the empty homes. According to most estimates, more than thirty thousand private homes remain unoccupied. Rental transactions have undergone a growth in two years, mostly in the Outside Central Region. With more properties available in the market and higher vacancy rates, the rental prices may not undergo any appreciation. There can actually be a contraction due to the pressure and rental prices may dip. This suits renters who are already looking for more affordable rents but the property market will have to deal with the aftermath, however transient or temporary it may be.

The influx of foreign workers has slowed down in recent years. There is no government initiative on the anvil that will encourage immigration. With the population poised to be almost unchanged and plenty more properties to be made available throughout 2018, Singapore may not be able to fill up its empty homes unless some dramatic measures are taken and the status quo changes as a result.

About the Author
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