“Singapore’s Property Glut Could Take Years to Clear” is the headline of the Economics section of Bloomberg (Asia) today (9 Dec 2019) by Faris Mokhtar. Just 6 days earlier (3 Dec 2019) Faris also wrote “Singapore Developers Raise Alarm Over Apartment Supply Glut“.
According to the 9 Dec article, Singapore had an overhang of 31,948 units as of Sept. 30, according to the Urban Redevelopment Authority. Christine Li, head of research for Singapore and Southeast Asia at Cushman & Wakefield Plc. said sales averaged about 2,500 homes per quarter this year, and at that rate, it will take almost four years to clear the backlog. They even said developers are calling for property curbs to be eased, including lowering the 20% stamp duty for foreign buyers and getting more time to sell apartments before being hit with punitive levies. The over-supply also threatens to push down prices, the central bank warned last month.
The URA also announced last week that the government’s land sales program for the first half of 2020, comprising sites that can yield 6,490 private residential units and 1,070 hotel rooms. The Singapore government has decided to keep the supply of residential units on the confirmed list for the first half of next year “broadly similar” to that of the second half of 2019, it said.
So what does this mean?
The above news shows that the DEVELOPERS could be under pressure. Property developers in Singapore have five years from the time of purchase to build and sell all units at a site, or risk being hit with a 25% levy.
“The acquisition of sites before 6 Jul 2018 by housing developers for the development of 5 or more units is subject to 15% ABSD, which may be remitted upfront subject to the conditions below. For acquisitions of sites on/after 6 Jul 2018, housing developers are subject to 30% ABSD of which, 25% ABSD may be remitted upfront subject to conditions below. The other 5% ABSD is non-remittable and remains payable within 14 days from the date of acquisition.” – from IRAS website
So with almost 4 years needed to clear the current supply of units and the developers having only 5 years to sell or be hit with 25% of ABSD not being able to be returned to them, the question is “do you think the developers will be able to clear their stocks in time?” It is possible that they might well be able to.
Current external economic uncertainties e.g. US-China Trade War, Brexit plus this perceived oversupply, added to the fact that Singapore has a white paper to increase its population and that housing demands are projected to be more than the supply in the next 5 to 10 years… do you think the property market is going to be higher or lower compared to current prices in 10 years time?
Ever heard of phrases like “the time to buy is when there’s blood in the streets, even if the blood is your own” and “Buy on the sound of cannons, sell on the sound of trumpets”?
Or what about this line: “My dear friend, if the streets of Paris were not running with blood do you think you would be able to buy at the present prices?“?
If the oversupply is going to result in developers bleeding, would you not want to take advantage of the current oversupply and buy as the developers will be PRICED TO SELL?
The law of demand says that the quantity of a good demanded falls as the price rises, and vice versa. So what do you think prospective property buyers should do in this market?
Singapore's limited resources
Think of the fact that Singapore´s available land as a Garden City is limited unless we reclaim more or go underground – underwater. Plus we have the population white paper from the government that wants to increase our population to 6.5 million to 6.9 million by 2030.
Choice of units
Saying there is an overhang of 31,948 units left doesn’t show market sentiment. Many new launch projects have only the bigger units left, with most of the units below 1.5mil being snapped up by locals and those above 3mil mostly by foreigners. So, even if there are many units left, they might not fit your budget and likings.
If you have any property queries feel free to contact me and I´d be happy to have a no-obligations chat over a cup of tea about the property market!