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Vacant luxury homes nearing 10% threshold

Posted on 26 Jun 2014 | Comments Off

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.

Projects in the pipeline by HSR Research

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.

Take-up rate based on units launched to-date HSR Research

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.

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Posted in Luxury Property, Property Market / Real Estate

Tagged Luxury Property, prime districts, Singapore Property Market, vacancy rates

Home prices to dip 10 to 20%: OCBC

Posted on 26 Jun 2014 | Comments Off

OCBC sees residential prices will dip ten to 20 percent over 2014 to 2015.

However, a price crash in excess of 20 percent is unlikely, even after accounting for the anticipated physical oversupply and interest rate uptrend ahead, according to a recent OCBC report.

“One key argument against a crash is that we believe there is a high price elasticity of demand in the market largely due to a prolonged period of physical undersupply from 2004 to 2012. Simply put, significantly more buyers will likely come into the market at lower price points, which will slow the rate of decline as prices soften,” the statement said.

Despite the strong sales recoded in May, the report pointed out the take-up rate of 82 percent in the month was lower on a month-on-month and year-on-year basis, as figures for April 2014 was at 125 percent while May 2013 stood at 97 percent.

Additionally, OCBC’s base case is that primary sales for the year will fall: “We forecast FY 14 primary private home sales to dip 33 percent to 10,000 units, and see prices in mass market segment to be more at risk versus the mid-tier and high end.”