Surge in new home supply likely in 2012

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The Straits Times
Nov 4, 2011
Surge in new home supply likely in 2012

By Cheryl Lim

AN ANTICIPATED surge of new private homes may come sooner than officially forecast, according to a report by property consultancy International Property Advisor (IPA).

In its November estimates, it said 14,000 new homes might be completed next year, significantly more than the 12,043 new home completions predicted by the Urban Redevelopment Authority (URA) in its third-quarter property forecast.

The predictions for 2013 follow a similar trend, with IPA's estimate of 17,000 homes far ahead of the 12,882 new homes anticipated by the URA.

IPA chief executive Ku Swee Yong said his forecasts are based on the fact developers often complete projects within three years, shorter than the estimated legal completion period of up to five years developers are bound by. A faster completion date translates to speedier payments from buyers.

'Buyers make progress payments at each stage of completion so the quicker the job gets done, the sooner the developers can get paid,' said Mr Ku.

While the shorter wait for homes will be good news for buyers who intend to occupy the new units, Mr Ku cautioned that it could turn out to be a double-edged sword for investors.

'As an investor, yes, you get the apartment earlier, but you might have bought it anticipating a stronger rental demand because fewer homes were expected to be completed within the same year.

'It could mean you are entering a market that is very congested with new apartments, which may severely affect the rental demand for your investment property.'

Fears of a weakening global economy could lead to a slowdown in the rental market, weaker demand for more new homes and developers reducing prices to maintain a consistent pace of sales for new homes, said Mr Ku.

'Last quarter, a project may have launched for $900 per sq ft with a 90 per cent sell-out rate in two months. But developers might be led to lower their prices in order to achieve the same sales pace next year.'

Mr Ku said the market might experience a 5 per cent to 10 per cent dip in the prices of new and resale private residential property within the next year.

The concerns about the oncoming supply of new private homes translated to more cautious bids for a government land sale site at the junction of Punggol Central and Edgedale Plains.

The tender exercise for the 99-year leasehold land parcel closed yesterday, attracting Qingjian Realty's top bid of $215.9 million.

With a gross floor area of 654,105 sq ft, the new development could have about 610 apartments.
My Value Investing Blog:
My 2cents worthed = If interest rates do not rise OR jobless rate does not increase, demand will be sustained and any changes in supply is not going to move property prices much...

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