Apartment vacancy rates in Singapore are almost at a 10-year high, with about 9.2 percent of units sitting empty in Q2 2015, the highest since a 9.8 percent rate was recorded in end-2005.
The rise in vacancy rates may be due to the record number of home completions. In 2014 alone, 19,941 private homes were completed while another 42,606 units are expected to be completed this year and in 2016, of which 96 percent are non-landed homes, according to SLP Research.
The oversupply is partly a result of the government’s efforts to cool the residential market.
And as housing demand fails to grow along with supply, rents are expected to remain under pressure.
As such, the government has made fewer development sites available for sale. But units on the land sold only enter the market after four to five years.
Meanwhile, immigration is key to boosting demand, although the idea is widely unpopular.
The government has been restricting the number of people coming to Singapore, a policy which has contributed to higher vacancy rates.
The slowdown in the global economy is also making matters worse.
Many agents are faced with lease terminations for expats working in industries faring poorly like oil and gas and banking.
In fact, demand could be further hit by a new policy unveiled by the Ministry of Manpower. Late last month, the ministry announced it would raise the minimum salary cap for foreigners working in Singapore to apply for visas for their family members.
Nonetheless, market watchers note that the government has shown signs of softening its stance.
Speaking at a dialogue last month, Prime Minister Lee Hsien Loong said it makes economic sense to accept foreign labour as well as immigrants, even though it may be emotionally hard to accept. “We need to make the best possible decision for Singaporeans,” he noted.
Decisions in this area impact housing, the outlook of which is bleak should demand fail to grow. With the non-landed vacancy rate likely to hit 10 percent by end-2015, SLP Research expects the woes of property developers and landlords to continue.