Redas president sounds cautionary note despite upturn in URA's Q3 private home price index

DESPITE the recent upturn in the Urban Redevelopment Authority's (URA) private home price index, the developers' body is sounding a cautionary note.

"...private housing rents are still falling and vacancies remain high even as new completions are adding to current inventory at a time when multinational companies are either downsizing or recruiting headcount at a cautionary pace," Augustine Tan, president of the Real Estate Developers' Association of Singapore (Redas), said on Wednesday.

Based on URA's data, the vacancy rate for private homes stood at 8.1 per cent as at end-Q2 2017, unchanged from the previous quarter. The URA will release the full Q3 private residential property market data later this month. Its third-quarter flash estimate on Monday showed that its private home price index rose 0.5 per cent over the previous quarter, the first increase after the index shed 11.6 per cent over 15 quarters.

In his speech at Redas' Mid-Autumn Festival lunch, Mr Tan also highlighted that the supply pipeline is set to grow from the sales of residential sites through private-sector sources such as collective sales, as well as through the Government Land Sales (GLS) Programme.

Increasingly, land-hungry developers have been buying land at higher prices, a trend that has "many significant associated risks", Mr Tan said.

"Notably, it is not sustainable to continue at this rate. With property measures in place, slow growth in Singapore's population and manpower curbs, we do not see a runaway demand in sales transaction volume and property prices in the next few years. Buyers are still price sensitive," he added.

"If the prevailing 'bullish' appetite for residential land persists while demand (for end units) is not sustained, it will hasten the compounding effects of increasing supply and high vacancy."

Moreover, interest rates will continue rising, he added.

"As developers, we value stability in the property market," he said.

"While the residential property market appears to be on the mend and developers are aggressively replenishing their land bank to sustain their business, the length and amplitude of this new cycle is uncertain."

The downside risks of geopolitical uncertainty, global economic activity and monetary policy tightening, coupled with domestic structural challenges to the economy and elevated unemployment rate, are ongoing concerns, Mr Tan added.