Completed Condo market: Further downside expected as supply increases, leasing demand weakens

PRICES of completed private condos resumed their fall in June as distractions from the school vacation and World Cup fever dampened buying interests.

A looming supply of completed homes and weakening leasing demand will continue to weigh on prices, market watchers say.

Last month, the Singapore Residential Price Index (SRPI) released by the National University of Singapore (NUS) slipped one per cent month-on-month in June, after a revised 0.4 per cent rise in May.

Small units of 506 sq ft and below saw a 0.4 per cent dip in prices last month nationwide.

“Private resale home prices are expected to continue to soften with all the measures in place,” said ERA Realty key executive officer Eugene Lim. “In addition, private resale market is facing competition due to the increased supply. We will continue to see more deals being closed at realistic prices.”

The NUS indices, which track completed private condos and apartments, excluding executive condos, reflect transactions received as at July 21.

While the overall NUS SRPI for June reflects a 9 per cent fall from the peak in May 2013, it is still 36.1 per cent above the level in January 2008.

Excluding shoebox units, prices of completed homes in the Central Region – comprising districts 1 to 4 and districts 9 to 11 – fell 1.5 per cent in June from May, while those in non-central region edged down 0.4 per cent in June.

Official figures from URA last week showed that there are a total of 1,412 private homes that are completed but unsold as at end-June. And the bulk of these unsold units – 63.3 per cent – are located in the Core Central Region, which covers districts 9, 10, 11, downtown core and Sentosa.

Vacancy rate is also on the rise, according to URA, climbing from 6.6 per cent in the first quarter to 7.1 per cent in the second – the highest level since the 7.4 per cent recorded in the first quarter of 2006.

R’ST Research director Ong Kah Seng noted that buying interest for homes in the Central Region is very weak given ample unsold developer stock and the easing rental market as companies tighten housing budgets for expatriates.

“Even the pool of buyers of smaller/average size units in Central Region is shrinking as they usually require large loans but TDSR (total debt servicing ratio) limits put a cap to it,” Mr Ong added.

The Outside Central region (OCR) that has held up slightly better so far may also experience further weakness.

Nicholas Mak, executive director of SLP International, reckoned that a higher proportion of suburban condos bought during the property boom of 2009-2013 was investment-driven, compared to that during the 2005-2007 boom.

As more units in OCR reach completion next year onwards, there will be some pressures – first on the rental market and then on resale prices, Mr Mak said.

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