The vacancy rate for private homes is at its highest level in nearly 10 years – the result of rising completions and curbs on foreigners coming here to work, experts say.
About 7.8 per cent, or 24,062 completed private residential units, were vacant at Dec 31 last year, according to figures released by the Urban Redevelopment Authority (URA) yesterday.
That was an increase from 7.1 per cent or 21,569 vacant units in the third quarter of last year and the highest vacancy rate recorded since 8.4 per cent in the fourth quarter of 2005.
The vacancy rate includes sold and unsold units, but most of the completed units would have been sold as they were launched before the introduction of the total debt servicing ratio, said Mr Alan Cheong, Savills Singapore research head.
“(The high vacancy rate) is symptomatic of supply coming on stream faster than demand. And the structure of demand has been changing… Whereas, for the past 30 or 40 years, one expatriate could be mapped onto one apartment, one expatriate may now be taking up a smaller apartment or a room.”
Housing stock rose by a net 6,304 units in the fourth quarter of last year – a historical quarterly high, said a URA spokesman.
Last year, 19,941 private residential units were completed, up 52 per cent from 13,150 in 2013.
Another 21,359 units are pegged for completion this year, and 20,919 next year.
“It’s quite a great magnitude; vacancy rates could rise further if leasing demand does not pick up,” said Mr Ong Teck Hui, JLL national research director.
Large projects completed in the fourth quarter included 1,715-unit d’Leedon, 473-unit Seastrand and 452-unit Parc Vera.
As most new completions are condos, the non-landed segment’s vacancy rate rose to 9.1 per cent in the fourth quarter from 8.2 in the third quarter, said Mr Ong.
The vacancy rate for landed homes was 3.4 per cent in the fourth quarter, down slightly from 3.5 per cent in the preceding quarter.
The completions have put pressure on rents, which fell 1 per cent for the fourth quarter and 3 per cent for the full year – a reversal of four straight years of rising rents. Rents added 0.9 per cent in 2013 and 2.14 per cent in 2012.
Across different residential types, rents for semi-detached homes fell the most at 7.6 per cent for the year, and non-landed homes the least at 2.6 per cent.
Non-landed rents fell 3.7 per cent in the central region, 2.5 per cent in the suburbs and 0.2 per cent in the city fringe from a year back.
Rents are set to fall by up to 8 per cent this year, with the drop most pronounced in the central region as firms keep cutting back on housing allowances, said Mr Ong Kah Seng, R’ST Research director.
The market could head towards a 10 per cent vacancy rate this year, said Mr Cheong. “With cooling measures in place, we are heading into a period of uncertainty and sailing into a storm.”
Yet even if measures are relaxed now, demand may not come back, he said. For example, many multinational corporations will not be pushing as many staff to Asia as their home economies have not recovered for some time, and they are facing slower demand in Asia owing to China’s slowdown, he said.
“As long as Singaporeans hold a job, we can take 10, 11 per cent vacancy rates. But if another global crisis hits and unemployment goes up, rents will start to crash and there will be foreclosures. In fighting asset inflation, we have also increased risk.”
RENTS UNDER PRESSURE
The number of vacant completed residential units at the end of the fourth quarter of 2014, nearly 2,500 units more than in the quarter before.
The number of private residential units that were completed last year, up 52 per cent from 13,150 in 2013.
3 per cent
The full-year drop in rents last year, marking a reversal from the rise in rents in the preceding four years.
8 per cent
The expected maximum fall in rents this year, with the most pronounced drop in the central region as firms cut back on housing allowances.