Vacancy rates in the prime districts are likely to increase as more projects are completed. According to the latest report by HSR Research, this will cause rents to come under pressure and prices will be capped.
Based on quarterly data, the current average vacancy rates in the central region of eight to nine percent are close to historical average levels. When vacancy rates rise to 10 percent and above, there will be downward pressure in rents.
The demand for properties in prime districts during 2006 to 2008 was due to the rapid rise of foreigners, especially high-income expatriates, coming to Singapore. However, the inflow of such employees is significantly lower today.
As of 1Q 2014, there were 53,841 non-landed residential units in Districts, 9, 10, 11 and Sentosa. With an estimated 5,836 new units to be completed in the prime districts from 2014 to 2016, HSR predicts a challenging outlook.
12 high-end projects, with a total of 2,060 units, are in the pipeline for launch in the prime district.
However there was only one new luxury launch this year so far; the 120-unit The Rise @ Oxley in District 9.
There has been a slowdown in luxury launches since H2 2013, when 563 units were launched compared to 826 units in H1 2013.
To move unsold units, some developers have either cut prices or offered higher discounts for selected units. For example, MCL Land offered a 10 percent discount for Hallmark Residences in District 10, while CapitaLand offered a 15 percent discount for the rest of the Urban Resort Condominium units in District 9.
Image source: HSR Research.