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Few districts see chance of oversupply of homes: study

Govt land sales, collective sale sites make up large portion of new units in these areas

A new study on the upcoming supply of private residential units from development sites sold suggests that oversupply risks, if any, may be contained within certain districts.


A NEW study on the upcoming supply of private residential units from development sites sold suggests that oversupply risks, if any, may be contained within certain districts.

Islandwide, only Districts 3, 5, 13, 18 and 19 appear to have a relatively high number of upcoming residential units in relation to the current completed units there - in the proportions of 12 to 34 per cent.

Each of these districts has at least 2,000 units that can be launched from sites sold to developers under government land sales (GLS) and collective sale sites, the study by Cushman & Wakefield shows.

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Sites that contributed to a supply surge in these districts include some 1,200 units from the former Normanton Park site by Kingsford and up to 730 units from the West Coast Vale GLS site by City Developments in District 5, where the nearly 5,000 upcoming units mark the highest figure across districts.

The Stirling Road GLS site acquired by Logan Property and Nanshan Group, which could yield some 1,259 units, and the collective sale of Pearl Bank Apartments to CapitaLand that may generate 800 units, mainly contributed to a jump in supply in District 3.

Over at District 13, some 750 units could be generated from the former Raintree Gardens site and around 735 units from the Woodleigh Lane GLS site acquired by a joint venture between Chip Eng Seng, Heeton and KSH Holdings.

For District 19, there is significant supply mainly coming from former HUDC sites Rio Casa, Serangoon Ville, and Florence Regency that could each yield over 1,000 units, as well as Serangoon North Avenue 1 that could generate around 505 units.

At District 18, the upcoming supply mainly stems from former HUDC site Tampines Court (2,000 units) and the Tampines Avenue 10 GLS site (861 units).

JLL senior consultant Karamjit Singh, who is also CEO of Showsuite, noted that the North-eastern corridor seems to have some of the highest supply due to several huge former HUDC sites sold.

But the findings of such a study have to be read in conjunction with the total housing stock, including public HDB flats, he said.

Taking the example of Tampines in District 18 where the number of upcoming units looks intimidating, there is significant upgraders' demand coming from the large pool of HDB occupiers there, as the traditional proportion of housing stock in the estate is heavily skewed towards public housing.

Intuitively, this supply study may help developers focus on districts that do not seem to have that much supply.

Cushman & Wakefield research director Christine Li, who undertook the study, also pointed out that while the risk of an oversupply appears to be highest in District 5, where the upcoming supply is one-third of the existing private housing stock, that district also has one of the lowest unsold units (around 230 units) in launched projects.

"Given the low unsold inventory in the district, the pent-up demand could help to moderate the pressure on the pricing," she said. "Nevertheless, against the backdrop of slower population growth, the supply resulting from the redevelopment of the larger HUDC sites could be a risk to the market."

She noted that developers are probably spoilt for choice, thanks to a plethora of collective sale sites. It would hence make sense to channel more attention to those districts where the ratio of incoming supply to the existing housing stock looks benign. Sites in such districts may stand a better chance of garnering buyers' interest.

"There is also an undersupply of freehold or 999-year leasehold properties in the upcoming supply pipeline, which can present opportunities for developers as long-term investors and savvy buyers generally have a preference for freehold properties," Ms Li added.

Upcoming sites in the GLS programme that are expected to be keenly contested include the Holland Road mixed-use site, a two-envelop tender that may raise the winning chance of developers who have not secured any land parcel in the past 12 to 18 months.

In general, districts with improved infrastructure, amenities and population growth will see strong underlying purchasing demand, as property prices tend to appreciate along with improved accessibility, Ms Li predicted. "I will be more optimistic about areas along the Thomson-East Coast MRT Line, which cuts across a few such districts."

But Alan Cheong, Savills Singapore senior director for research and consultancy, flagged that a distinction must be made between demand to buy homes and the demand to occupy them.

Developers will continue to bid for sites because they are looking at the buyers' market rather than the demand of homes for own use or rental.

With the ongoing home-buying demand, the upcoming launch supply is not excessive because the take-up is still expected to be decent. But whether these homes, when completed, are filled by warm bodies is a different story.

Mr Cheong said: "When completed, the supply from the collective sale sites adds additional pressure on rents because it comes on top of the planned GLS numbers."

READ MORE: Developers' war chest of cash keeps collective sale party going