Singapore Property Glut May Curb Prices, Central Bank Says

(Bloomberg) --

An over-supply of apartments threatens to push down Singapore property prices, the city-state’s central bank said.

The number of unsold units from new projects doubled to 4,377 in the third quarter, the Monetary Authority of Singapore said in its annual Financial Stability Review released Thursday.

The overhang will probably “be exacerbated in the medium term” as developers launch projects from a slew of redevelopment or ‘en-bloc’ deals struck in the past two years, MAS said.

“The increase in the unsold inventory could place downward pressure on prices in the medium term, if unaccompanied by a corresponding rise in demand,” the report said.

While residential property prices declined after the government imposed a fresh round of property curbs in July 2018, they have recently started to creep up again, gaining 1.3% last quarter.

According to the Urban Redevelopment Authority, there were 50,964 uncompleted private residential units in the pipeline at the end of last quarter, up from 50,674 units in the previous quarter.

MAS also warned people to be cautious, given an uncertain economic outlook and weaker labor market could affect household incomes and demand for property.

“Given these downside risks, prospective buyers should be mindful of risks and remain prudent before entering into long-term decisions, for instance buying a property, taking on a mortgage, and servicing that mortgage,” the report said.

What analysts say:

• Tricia Song, head of research for Singapore at Colliers International Group Inc., says developer sales have “remained relatively resilient” this year. She expects private apartment prices to stabilize and rise 2% in 2019.
• In 2020, Song expects prices to rise between 2%-3%, in line with the city-state’s GDP growth. However, “a worse-than-expected downturn could definitely dampen demand in the medium term and put downward pressure on developers,” she said.
• Oversea-Chinese Banking Corp. economist Selena Ling says appetite for property will be pegged to the resilience of the domestic labor market, especially in terms of job creation and security, and wage growth expectations.
• “A further softening in the labor market ahead may dampen investor appetite for big-ticket items like property, especially if the macro-economic environment remains subdued in the near-term,” she says.

--With assistance from Nasreen Seria.

To contact the reporter on this story: Faris Mokhtar in Singapore at fmokhtar1@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net, Peter Vercoe, Candice Zachariahs

©2019 Bloomberg L.P.