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On the rise – vacant private homes

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According to the Property Guru website, “the number of vacant private homes in Singapore is steadily rising, climbing 10.3 percent to 21,268 units in Q2 2014 from 19,284 units in the previous quarter.”

Property Guru was citing a report by Savills, a global real estate consultancy.

The vacancy rate of these homes rose from 6.6 per cent to 7.1 per cent the past year.

With more supply of such homes coming on-stream in the coming months, Savills forecasts that the island-wide vacancy rate will increase further.

“Some 8,066 new private residential units are expected to be completed by the end of 2014. This could possibly drive the island-wide vacancy rate up to double digits before the year ends,” Savills said.

The number of vacant homes was highlighted in news report even in 2012, when it was reported that there were “15,890 unsold homes in Singapore – a substantial increase on the 12,740 at the start of the year.” (See here.)

By May 2014, the market had hit a quiet spell again which has continued.

“Completed luxury homes without owners are gathering dust in exclusive pockets of the city centre as developers hold off selling them in a moribund luxury market,” the ST Property website reported on May 31.

The reason for the lukewarm sentiment, according to experts, are the property market cooling measures that have driven away many buyers in the high-end segment.

"Wealthy property buyers are the most savvy investors... Many are not in a hurry to buy luxury properties," said R'ST Research director Ong Kah Seng then.

In July, the issue surfaced once again.

“The threat of an oversupply of private homes and a poor rental market are deterring home-seekers from buying completed homes, especially in the beleaguered city centre,” reported My Paper.

It said that the upscale districts of 9, 10 and 11 accounted “for the bulk of unsold units at completed developments across Singapore.”

In February, the executive chairman of Hong Leong Group Singapore and City Developments, Kwek Leng Beng, urged the Government to review the property cooling measures it has installed.

He repeated his call in July, and warned that “foreigners were choosing to plough their investment dollars into countries like Britain, Australia and the US over Singapore, while Singaporeans have been investing abroad.”

“We are losing these investments to other countries even though these foreign properties have a higher risk profile. It is unlikely these investment dollars will return to Singapore.”

“The overall picture seems to suggest that it may be timely now for the Government to take another look at the cooling measures introduced and make adjustments accordingly,” he said.

However, the Government has steadfastly stood its grounds on the measures to stabilise prices.

Deputy Prime Minister and Minister for Finance, Tharman Shanmugaratnam has said that it “is too early to relax” the rules.

His views were later echoed by the managing director of the MAS, Ravi Menon, in July.

"The prices are just beginning to soften,” said Mr Menon. “Levels of prices remain very high, interest rates remain very low, debt levels remain high for the highly leveraged households. It will take time for this to adjust, some further adjustment in prices is not unexpected; we will watch very closely supply and demand conditions - not just levels. but also changes; we will look very carefully at the credit and liquidity environment and a variety of other factors to make a continual judgement.

“As I stated, the objective is not to see a collapse in prices but at the same time to have an orderly correction and stabilisation of the market which is now beginning to take place.”

The MAS said property prices have risen 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters.

“On the whole, it would be premature to ease property cooling measures now as it was important to secure the gains made in stabilising the market and restoring financial prudence,” it said.