A report released last Friday by leading research house, Religare, carries ill news for property investors looking to flip homes in the near future.
The report revealed that rents and prices of homes could decline by as much as 15% from now till 2016 driven by slowing population growth.
Religare estimates that the supply of completed new non-landed homes will swell by 223,000 by 2017; of which 100,000 will be private housing and 123,000 Housing Development Board (HDB) flats. This translates to an average annual 7 to 8% increase in supply.
At the same time population growth is expected to head in the opposite direction. The annual population growth is projected to slow to 1.7%, or 400,000 people, by 2017; stemming in part to policies to tighten the supply of foreign workers. This 1.7% figure is considerably lower than the year-on-year increase seen over the past eight years. The last time a lower growth rate was had was in 2004 when population increased by 1.26% from the previous year.
Table 1 presents the total population number and annual increase from 2002 to 2012.
Table 1: Singapore's Population 2001-2012
| Year |
Total Population ('000)
|
Annual % Change
|
| 2012 |
5,312.4
|
2.48%
|
| 2011 |
5,183.7
|
2.11%
|
| 2010 (Census) |
5,076.7
|
1.79%
|
| 2009 |
4,987.6
|
3.06%
|
| 2008 |
4,839.4
|
5.47%
|
| 2007 |
4,588.6
|
4.25%
|
| 2006 |
4,401.4
|
3.18%
|
| 2005 |
4,265.8
|
2.38%
|
| 2004 |
4,166.7
|
1.26%
|
| 2003 |
4,114.8
|
-1.47%
|
| 2002 |
4,176.0
|
0.92%
|
| 2001 |
4,138.0
|
|
Source: Dept of Statistics Singapore
Religare predicted that based on the supply of new homes and population growth rate, vacancy rates will up from the 5.6% now to 8 or 9% in 2016.
It added that, "Historically, rents have corrected whenever vacancy rates reached or went above 7 per cent".
The fall in rents will have a spillover effect on prices. Religare believes that lower rents will result in investors exiting the market and cause a fall in demand: the final outcome is a lowering in average prices.
The magnitude of the projected fall in home prices and rents differs among industry experts.
Religare anticipates that price growth will stagnate from now till the end of the year; after which it can turn negative. Overall, by 2016, rents and prices are expected to fall by 10 to 15%.
Mr Ku Swee Yong, chief executive of property consultancy International Property Advisor, predicts a milder decline of 5 to 10%, stunted by a HDB rule which bars the subletting of flats within 5 years after purchase. In addition, he believes some of the new units will be for owner-occupation which will reduce the supply of rental units.
A Macquarie Group report predicts that home prices could fall by 3 to 5% this year.
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