THE threat of an oversupply of private homes and a poor rental market are deterring home-seekers from buying completed homes, especially in the city centre.
The upscale Districts 9, 10 and 11 account for the bulk of unsold units at completed developments across Singapore, according to data last week.
Consultants said that buyers were still wary of taking the plunge, particularly in the luxury segment, due to a flood of new units entering the market and the increased difficulty in finding tenants.
Private home vacancy rates have reached their highest point since 2006, according to Urban Redevelopment Authority (URA) figures.
Developers appear to be responding by cutting prices further to boost sales in order to avoid penalties for failing to sell all their units by a deadline, consultants added.
Fines are imposed if a builder fails to sell all the apartments in a project within two years of completion, under Qualifying Certificate (QC) rules.
There were 1,412 completed but unsold homes at the end of June – 1,259 condominium units and private apartments, and 153 landed houses – according to the URA last Friday.
The city centre accounted for the bulk of that – about 894 units, or 63.3 per cent – while the city fringe had about 414 unsold units, or 29.3 per cent of the total, said OrangeTee research head Christine Li.
Both areas far outstripped the suburbs, where there were only 104 unsold completed units, or 7.4 per cent of the total.
Ms Li pointed out that the prices of completed homes in the city centre slid 1.9 per cent in April through June from the previous three months, the largest quarterly drop since the second quarter of 2009.
“This could suggest that some developers have started to become skittish and have started to cut prices in order to move units to avoid QC fines.”
Still, buyers will likely stay on the sidelines partly due to rising vacancy rates and a possible supply overhang in the near future, consultants said.
The islandwide vacancy rate for all private homes, including landed housing, climbed from 6.6 per cent in the first quarter of this year to 7.1 per cent in the second – the highest level since the 7.4 per cent recorded in the first quarter of 2006.
City centre homes were the worst hit in the second quarter of this year, with a vacancy rate of 8.5 per cent, said the URA.
R’ST Research director Ong Kah Seng said that owners of some city centre units may have left the apartments empty because they were unable to fetch rents high enough to be cost-effective, given the high maintenance costs.
For instance, tenants may speed up the normal process of wear and tear, or require the landlord to replace some parts of the house, he told The Straits Times. The cost of those repair or replacement work may not be worth the rent in some cases.
“When there are significant ‘pitch-dark’ condominiums in the prime districts, it will paint a negative picture of lifelessness in Singapore’s central region,” he added.
Consultants said that a bumper crop of completed homes could weaken the leasing market even further. JLL Singapore research director Ong Teck Hui pointed out that there were 9,016 private homes completed in the first six months of this year, compared with 13,150 units throughout the whole of last year and 10,329 units over 2012.
Some developers have slashed prices to move remaining units in projects that are substantially sold.
At the freehold The Vermont at Cairnhill, developer Bukit Sembawang had 37 units unsold by the end of June but has managed to move more than 30 this month by cutting prices, according to real estate agents.
Prices per sq ft (psf) were reduced to just over $2,000 psf about two weeks ago, down from the previous average of around $2,400 psf, agents said, making a drop of up to 16 per cent.
Cape Royale in Sentosa had not moved any of its 302 apartments as at the end of June, making it the project with the highest number of completed but unsold units.
Developers IOI and Ho Bee decided to rent out units there instead of selling them.
CapitaLand’s The Interlace in Alexandra was next with 180 units left, but that is just 17 per cent out of its 1,040 units in total.