Singapore property market 2015

The property sector remained subdued but not really that bad at all. Barclays will show you in 10 charts.

November developer sales rose 39% m/m and 79% y/y to 759 units, bringing 11M15 sales to 7,144 units (-0.1% y/y). While Barclays expects a quiet December, believes sales for full year 2015 could slightly exceed 2014’s full year sales of 7,316 units.

MAS in a review last month noted that “risks in the sector are abating”. Barclays believe a peak vacancy rate of 10% next year and rate hikes will push down prices another 5-8% in 2016. By then the government could be ready for some policy easing, it said.

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November developer sales rose 39% m/m and 79% y/y to 759 units, bringing 11M15 sales to 7,144 units (-0.1% y/y)

The jump in November developer sales was mainly due to the decent 38% sell-through rate at one new launch, Poiz Residences at Potong Pasir MRT station, which sold 277 of 731 total units at a median price of S$1,440psf. There are also some pick-up in sales at earlier-launched projects such as Sky Vue, Botanique at Bartley and Commonwealth Towers, and continued progressive sales at suburban projects, reflecting underlying demand. Sales remained steady at high-end large quantum projects like Leedon Residence and Robin Residences.

November sales figure is the third highest monthly sales in 2015 after July sales of 1,611units and April sales of 1,167 units. While Barclays expect a quiet December, it believes that sales for full year 2015 could match or slightly exceed 2014’s full year sales of 7,316 units.

In its Financial Stability Review dated November 2015, MAS reassessed the risks in the household sector from rising interest rates and a slowing economy. It concludes that most households have been prudent and their debt servicing ratios would remain manageable under stress. However, MAS estimates that 5-10% of households have debt-servicing ratios (DSR) above 60% and will be at risk when mortgage rates rise.

Funds continue to flow into asset markets, and property prices in regional markets especially Hong Kong, Malaysia and Taiwan had remained buoyant. According to MAS, Singapore private homes have risen 14% since Mar 2010, weaker than Malaysia’s 60%, Hong Kong’s 117% and Taiwan’s 54%, but close to Thailand’s 20% and Korea’s 14%.

While property prices have declined at a measured pace with softening transaction acitivity, the risk of a “sharper-than-warranted correction” in the property market cannot be discounted. A culmination of adverse headwinds in the external outlook and surprises in the timing and trajectory of interest rate increases by the US Federal Reserve could prompt knee-jerk reactions and trigger volatility in the financial and asset markets. This could disrupt a benign and orderly correction in the property market.

Since 2013, vacancy rates have risen from 5.2% to 7.8% while rentals declined by 6.7%. MAS understands that some homeowners who are relying on rental income to service housing loans on their investment properties could face difficulties. MAS estimates it would take 3.1 years to clear the projected unsold supply coming on-stream in the next five years, based on the relatively mild take-up rate of new units seen in the preceding four quarters (c7,500). This is broadly in line with the long term average and significantly lower than the peak of more than 10 years during the GFC in 1Q09.

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Singapore property market 2015

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