SG Property outlook

From the article below by Joseph Chong, one can conclude:

a. property investors still holding physical properties as investments will face a glut of supply in 2013 onwards - so prepare for a fall in prices anytime from now.

b. property buyers - wait if u can for the roof over your head.

c. construction companies should do well this year and the next - after that, bo seng li.





........the residential property market where buyers have been too optimistic about future demand, whilst the government sells residential land and builds new HDB flats at a pace far above the level of expected future demand, in order to correct the earlier undersupply.

According to URA data, an additional 8,100 new private homes on average has been occupied every year since 1995. However, given the curbs by the government on population growth to alleviate the overcrowding, demand in the next few years will probably be below this historical number. Indeed, the most current URA data show that despite the economic rebound, we have already fallen to 8,100 already. The government has been quicker to curb housing demand than expected.

Assuming we stay at 1.2 million foreigners and a historical growth rate of 1.5 per cent in the resident population, demand for dwellings going forward from growth in the resident population will be about 55,000/3.5=15,714 per annum. 3.5 is the median household size.

Now, let's look at supply. According to the latest URA data, 6,714 units under construction will be completed in 2011. In 2013, 11,621 units under construction will be completed with 7,091 under planning. Given the spate of new launches in 2010, we should see a substantial portion of this 7,091 under planning being constructed and completed. Hence, we should assume that around 18,000 units will be completed in 2013.

We see a similar picture for 2014, where we could expect about 15,000 units to be completed. In both 2013 and 2014, completed supply is far greater than the historical demand of 8,100 units. The vacancy rate could rise as much as 4 per cent over a 12-month period when all the completed homes hit the market in 2013 and 2014.

Nevertheless, the main pressure of oversupply from 2013 will come from HDB. HDB has ramped up its BTO programme to more than 20,000 units annually over the next few years! We expect about 12,000 BTO units will be completed in 2013 and about 20,000 in 2014. HDB and the private sector combined will deliver some 30,000 in 2013 and 35,000 units in 2014 - far in excess of the required 15,714 units projected from resident population growth.

We expect an oversupply of completed dwellings by 2013. The fall in rentals and the impact on capital values could be significant in 2013 unless demand surges significantly. During the Asian financial crisis of 1997, the vacancy rate climbed by 4 per cent in 12 months - pushing capital values down by 40 per cent. We could see a similar fall in 2013 and 2014.

Maybe this is why residential property stocks such as Allgreen Properties are trading at more than 20 per cent discount to published NTA - up from a 10 per cent discount a year ago. Despite growing its NTA, the stock has underperformed the STI by some 10 per cent over the past one year.

# The writer is CEO of financial adviser New Independent. He welcomes feedback at josephchong@ni.com.sg . This article is for information only. Readers should seek independent advice

Adding to the solid analysis by Joseph Chong, I would say that we should be watching the trend of interest rates and economy. In 2013, when the home supply shoots up, what if it so happened that interest rates have started an uptrend? What if the economy slows down? All these will be the perfect combination to give us a nightmare where property prices fall sharply.

A property guru told me this:

The fantastic take-up rate at new property launches that you see reported in newspapers  - u wont find that kind of enthusiasm in secondary sales.

The action is at launches because the developers are partnering banks to promote & excite ... and the banks are willing to offer a high valuation to support loan applications. Everybody wins.
For re-sale, there is a lot of problem now to find buyers.
 

SINGAPORE : Demand for landed properties is likely to be robust this year, according to market watchers.
They said landed property buyers are typically unaffected by the government measures to curb speculation. That is because they are less likely to speculate on their houses as they are usually long—term owner occupiers.
Analysts said going forward, limited supply of landed properties, low interest rates and abundant liquidity will fuel demand.
Landed properties like detached, semi—detached and terrace houses are in great demand. And the smaller developers who build mostly landed houses look set to benefit from it.
One such developer is Mushrooms Realty, which mostly builds detached houses.
Tan Wee Yong, founder of Mushrooms Realty, said: "Traditionally, they might be out of people’s budget. But nowadays, ... given the choice and if the price differential is not that great, I think most Singaporeans will go for landed property."
Despite a slew of cooling measures announced last year, healthy demand for landed properties pushed prices up by 31 per cent in 2010, outpacing the 17.6 per cent increase in non—landed home prices.
Nicholas Mak, executive director of research & consultancy, SLP International, said: "We see low interest rates, we see more liquidity in the property market, but another reason is that some of the home buyers feel that the newer apartments tend to be a bit smaller than some of the older apartments.
"And in order to have the luxury of space, some of these buyers turn to landed properties."
Analysts said landed home buyers usually hold onto their properties for a few years and should be able to avoid the new stamp duty tax of 4 per cent on homes sold within the fourth year of purchase.
Landed property sites have doubled in price in the last three years. For instance, a landed property site in Serangoon Gardens has seen its price jump from about S$500 per square foot (psf) three years ago to about S$800 psf currently.
Demand for landed property sites is also overwhelming current land supply.
Mr Tan said: "For freehold, I think there is a supply crunch. Actually, as long as there is a new piece of land coming out in the market, there will be a lot of interested parties ... if the asking price is at the market rate."
According to the Urban Redevelopment Authority, there are currently 70,000 landed housing units available in the market. That is 30 per cent of the entire private home supply.
Even with economic growth slowing this year from last year’s record—high level, analysts said landed property prices should rise by 8 to 12 per cent this year.
— CNA/al
 

Residential to fall 7% over two years: Prices have
remained firm, but sales momentum in the high-end
primary market and volumes in the secondary market
are declining. Launched but unsold units are also at
peak levels – suggesting increasing buyer fatigue. We
believe the government’s dual-pronged strategy of
capping price growth through policy while releasing
record land supply in the private market (and sharply
raising supply of public homes) will take its toll.

- MORGAN STANLEY, MAR 29

People not interested in property developers?

citibank said: "We met equity investors in Hong Kong and Singapore. At this stage of the cycle,
we like big-cap Singapore stocks that are mid-to-late economic-cycle plays.
Investors agreed valuations were attractive in Singapore and the growth phase
was intact, but there was less unanimity in terms of stock selection, with some of
the most spirited discussions revolving around banks (outperformance in 1Q)
versus real estate developers (underperformance in 1Q). Our sense was that
clients were well weighted in banks and were not weighted in developers."