MAS remains cautious on property market
Vacancy rates have been rising and reached 8.7 percent last quarter, noted the central bank.
The Monetary Authority of Singapore (MAS) remains cautious on the property market outlook, given that demand-supply dynamics may drag down the market, coupled with rising vacancy rates and softer economic and labour market conditions.
In its latest Financial Stability Review (FSR), Singapore’s central bank noted that the vacancy rate for private homes hit a high of 8.7 percent in the third quarter of 2016, up from 7.8 percent a year ago. Notably, 43,693 new units are projected to come on stream within the next five years.
“The majority of these units have already been sold, with the number of unsold units at a historical low of 20,577 as of Q3 2016.
“Assuming a take-up rate of new units equal to that seen in the preceding four quarters, it would take an estimated 2.8 years to clear the pipeline supply of unsold units, which is slightly below the long-term average of around three years,” noted the MAS.
In addition, it warned that rentals have fallen alongside the increase in vacancy rates, dropping by 10.7 percent since Q3 2013.
“Rising vacancy rates and declining rentals mean that potential investors may not always be able to rely on rental income to service their investment property loans,” said the MAS.
Meanwhile, private home prices across the island continue to decline, down by 10.8 percent from their peak in Q3 2013.
Home sales have also fallen, but the MAS noted that transaction levels have remained stable in the last three years. An average of 1,389 transactions were recorded in the first 10 months of 2016, compared to 1,210 over the same period last year.
According to the MAS, housing demand has been supported by low interest rates.
“Current low interest rates have kept a lid on the holding cost of property units for both owner-occupiers and investors. The three-month SGD SIBOR, which is commonly used as the reference rate for housing loans, has remained low at 0.9 percent in November 2016. This has contributed to the steady demand for private residential property,” said the MAS.
Moving forward, the central bank said it will continue to monitor market conditions. “(The) MAS remains vigilant in monitoring property market developments and, if necessary, will take appropriate measures to maintain a stable and sustainable market.”
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Romesh Navaratnarajah, Senior Editor at PropertyGuru, wrote this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
