Singapore property prices poised to fall by 20%

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singapore skylineResidential property prices in Singapore could be headed for a sizable correction of up to 20 per cent by 2015, according to an analysis by Barclays bank.

“We believe the risk of a residential property market correction in the next two years is rising, as expected higher interest rates look set to coincide with a large increase in housing supply over 2014-15,” Tricia Song, analyst at Barclays wrote in a report issued on September 27.

The bank forecasts prices will remain flat in 2013, before falling 5 per cent in 2014 and another 5-15 per cent in 2015. The outlook is based on expectations that short-term interest rates will begin their ascent in the second quarter of 2015, and rise 200 basis points over a period of six months. The pace of property price declines will be tied to the pace of interest rate rises, Song said.

Almost 95,000 private units are expected to come on the market over the next five years, alongside 25,000 to 27,000 public housing flats per annum, according to the Urban Redevelopment Authority.

“Total housing supply could average 40,000 units per annum and peak at 47,000 in 2015 – significantly above the historical average annual supply of 12,300 units,” Song said.

“Assuming occupier demand of 15,500 units of private housing per annum, we expect the private vacancy rate to rise from 5.6 percent currently to 9.9 percent in 2016,” she added, noting that historically when vacancy rates hit 8 per cent, rents and prices start declining.

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Reading Time: 1 minute

Residential property prices in Singapore could be headed for a sizable correction of up to 20 per cent by 2015, according to an analysis by Barclays bank.

Reading Time: 1 minute

singapore skylineResidential property prices in Singapore could be headed for a sizable correction of up to 20 per cent by 2015, according to an analysis by Barclays bank.

“We believe the risk of a residential property market correction in the next two years is rising, as expected higher interest rates look set to coincide with a large increase in housing supply over 2014-15,” Tricia Song, analyst at Barclays wrote in a report issued on September 27.

The bank forecasts prices will remain flat in 2013, before falling 5 per cent in 2014 and another 5-15 per cent in 2015. The outlook is based on expectations that short-term interest rates will begin their ascent in the second quarter of 2015, and rise 200 basis points over a period of six months. The pace of property price declines will be tied to the pace of interest rate rises, Song said.

Almost 95,000 private units are expected to come on the market over the next five years, alongside 25,000 to 27,000 public housing flats per annum, according to the Urban Redevelopment Authority.

“Total housing supply could average 40,000 units per annum and peak at 47,000 in 2015 – significantly above the historical average annual supply of 12,300 units,” Song said.

“Assuming occupier demand of 15,500 units of private housing per annum, we expect the private vacancy rate to rise from 5.6 percent currently to 9.9 percent in 2016,” she added, noting that historically when vacancy rates hit 8 per cent, rents and prices start declining.

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