You are here


H2 2016 may see green shoots of recovery for private homes

Over the first three-quarters of this year, prices of private non-landed homes have slipped 3.4 per cent, with the suburban region being the main drag, followed by the city fringe.


AMID all the gloom and doom surrounding the private residential market, a more contrarian view that has emerged now points to green shoots of recovery in the second half of 2016.

A continual downward drift in residential prices is almost a foregone conclusion in light of rising vacancies, impending interest-rate hikes and a slowing economy, consultants say.

But some believe transactions could see a rebound in the second half of 2016 as value emerges in some areas, such as the high-end market and secondary sales.

Market voices on:

Savills head of research Alan Cheong believes the market has long priced in the knowledge of an oversupply situation in 2016.

But he conceded that rents and vacancy rates have yet to fully reflect the looming oversupply, with the vacancy rate for non-landed residential units likely to cross 10 per cent next year. "It may take about 18 months till mid-2017 for the rental market and vacancy levels to improve," he said.

Knight Frank head of consultancy and research Alice Tan opined that it could be "a tale of two halves for Singapore's residential market" - a tepid first-half followed by a recovery in terms of transactions in the second half of next year, particularly for the high-end segment.

With hopes of some economic stimulus from the government and mature foreign markets such as Australia and London turning toppish, there could be a return of interest from both local and foreign buyers, she said. A gradual paring down in unsold inventory in the past two years points to latent demand though the current property cooling measures have remained in place.

"With the impending new completion of around 22,300 private home units next year, vacancy rate may creep up to 10 per cent or higher especially for non-landed homes, she projected.

Over the first three-quarters of this year, prices of private non-landed homes have slipped 3.4 per cent, with the suburban region being the main drag, followed by the city fringe. Prices are about 7.5 per cent below the peak of Q3 2013. Some 4,696 resales of private residential units in the first three-quarters marked a 26.6 per cent jump from the same period last year and made up 43 per cent of total transactions, official data shows. The tally of 5,837 new sales was 1.7 per cent lower than the year-ago period.

Mr Cheong is projecting primary sales of private non-landed homes, excluding executive condominiums (ECs), to hover around 7,500 units next year. Even with bonuses crimped and pay hikes subdued next year, he reckons that there is still a pool of potential buyers ready to commit particularly in H2 2016, when they find that the sharp price drops they are hoping for are not forthcoming.

While rents will continue to remain soft, falling rents may encourage some sub-tenants to take up leases themselves, thus propping up the number of rental transactions, he added.

SLP International executive director Nicholas Mak projected that if all things equal, non-landed home prices is expected to fall by 2.5 to 5 per cent in 2016. In a worst-case scenario where the sputtering economy deals a bigger blow to the labour market, and the government keeps property market curbs intact, prices may tank more than 5 per cent next year.

While it will take more time for the market to digest unsold stock, the government has been reducing land supply for the past two years, Mr Mak said. "So I don't expect a doomsday scenario here," he added.

OrangeTee senior manager for research and consultancy Wong Xian Yang foresees that prices in the Core Central Region (CCR) and Rest of Central Region (RCR) will start to stabilise in late 2016 or 2017, barring an economic crisis. "Demand may start gravitating towards the central regions (CCR and RCR) as prices become more attractive and affordable."

The most bearish projections came from Century 21 Singapore CEO Ku Swee Yong, who forecasts an 8-12 per cent drop in private non-landed home prices next year amid a surge in new completions and a 15 per cent slump in rents.

Based on his computation, there will be some 32,000 to 35,000 vacant non-landed homes that will translate to a vacancy rate of about 12 per cent by 2016.

"Extrapolating that into 2017, we will exceed 47,000 vacant units and hit perhaps 14 per cent vacancy. And this 2016-2017 timing coincides neatly with rising interest rates and Iskandar completions," he flagged. Even if these new completed homes here are sold out, they will still remain empty shells.

Hinting at the type of projects that may offer price cuts, Mr Ku noted that Trilinq in Clementi is likely the first project to hit the five-year mark by end-2016 from the date its developer IOI Properties acquired the site in a government land sale.

CapitaLand, which has been writing down on unsold units on its balance sheet, is already trimming prices for some remaining stock in D'Leedon and Sky Vue, while EL Development may slash prices at Symphony Suites, he said.

Mr Ku noted that EC projects with more than 300 unsold units are also vulnerable, namely Sol Acres, Signature At Yishun, The Brownstone, The Criterion, The Terrace, The Vales, and Westwood Residences.

The lack of a demand surge for ECs despite the raised household income ceiling of S$14,000 suggests that demand for ECs has been largely met, with the recent deluge of new HDB launches also cannibalising some of that demand, he said.

But Mr Cheong is sticking to his guns, saying that developers are still unlikely to make major slashes in prices. Those that need to clear inventory may do so marginally, given their high production costs and strong holding power. Meanwhile, the private resale market may surprise on the upside, he posited.

"After seeing many years where the primary sales market forms the majority of transactions, 2016 would be a year where the resale market forms the bulk of total transactions," he added.

"This should increase the volume of transactions as buyers who have the wherewithal but held back to wait for prices to fall begin to commit. In this regard, it is the emergence of value in the resale market that may surprise market watchers by registering a sudden turnaround in both price and volumes in 2016."

For more of BT's year-in-review stories, visit