As we addressed the concern of Singapore oversupply of residential market earlier, our housing price index had hit all time high of 152.8. Many home buyers will be wondering ‘Should I buy now or should I wait for a bit?”.
Looking back at the major events that occurred during the last property price index record (2nd Quarter 2013 at 154.6), we realized that the government had actually came out two of Singapore’s biggest cooling measures around this period. This effectively caused the price index fell in the coming months, making 2014 the first year of a 4-quarter steady price decline since 2008 (and before that, 2001). What are the 2 cooling measures? – 1. Revision of ABSD & Loan-to-value LTV. 2. Total debt servicing ratio TDSR in short. These measures have a common objective: reducing the affordability of home buyers.
The last time the price of Singapore housing market fall was during the financial meltdown and just after the dotcom bubble bursting.
Having say that, the watchful authorities willing to disrupt the property market with the measures to keep housing prices from further skyrocketing.
While we all know some of the factors drive the impact of future price trend, do you know what really drives housing prices at the end of the day? It is demand of Singapore Housing market.
Based on the chart, we observe that the price index (excluding rental price growth) falls as the completed unit vacancy increases & pipeline units are in excess. In nutshell, the price index begins to rise when unit vacancy decreases and pipeline units are in low supply. This is a usual trend until cooling measure was first implemented in 2013.
While cooling measure in 2013 did caused the sudden dip in the price index of Housing market. Many investors and key players adopted a ‘wait and see’ approach.
Now these cooling measures impacted the fundamentals on which investors and key players made their money. (Seller’s stamp duty and Additional buyer’s stamp duty mean their holding cost of a property is much higher than before.)
They had never witnessed this before and so the majority began treading cautiously. As a result demand fell as the property market sentiment was generally very poor. Developers’s existing vacant units were left unsold. Naturally, the absolute quantum of units and rents fell. The average price index dropped consecutively for 4 years.
Now the tide-turner came when the pipeline supply was getting relatively low (est 18,891) in 2017. Added the price fall in consecutively for 4 years, demand began to rise. But this time round may be different from the cycles (2013 and 2017) which both are generally affected by implementation of new cooling measures.
Whether price will drop, 3 important factors to consider: S.A.D
S – SUPPLY
Now for impact of price, demand and supply come in tandem when the figures get to ‘extreme’ points. What do this mean?
Basically, extremely high supply would result in increased competition between sellers and developers, naturally leading to a dip in prices.
And only way to get to this situation is either:
1.) An external factor impact resulting in continued low demand for eg. Cooling measures in 2013.
OR
2.) An extreme high numbers of units that comes from pipeline supply of previous years. For eg, enbloc cycles in 2017/18.
On the other hand, extremely low supply would naturally result in increased price.
Basically, savvy investors who predict a potential low supply/high priced index in the coming years would seek to enter early for better profits – prompting developers to step in with new projects for optimum profit. And hence repeating the ratio cycle.
A – Adapt
The biggest factor resulting this low property demand happened in the 2013-2017 period was the implement of cooling measure in 2013. And further enhancement of cooling measures came along the way following the price peaks.
Many home owners are getting increasingly adapt to new cooling measures (more specifically towards ABSD) and hence making bolder moves at a faster pace. It explain why the price index has risen for the past two consecutive quarters following just two quarters of minimal ‘price-falls’ post 2018 cooling measures.
D – Demand
As we mentioned previously, price will fall if supply reach to ‘extreme’ point. Hence, demand is tandem with supply up or down trend.
According to the table below, current pipeline supply for private residential is 50,964. Out of which, 31,948 units are unsold. (This includes supply from the past En Bloc and GLS sales.)
Estimated completion dates of all these 50,964 private residential units (assuming all completing in the stipulated timeline).
For accurate take up rate, we shall base on 2013 (first cooling measure) to 2017 (where the housing market start to pick up). We took an average of 9707 units / yearly take up rate. (Total units sold between 2013 to 2017 – 48,534 units divided by 5 years = 9,707 units / yearly). Assuming average of 9707 units sold over the next 4 years (2020 – 2023).
Based on July 2018 where the last cooling measure implemented on en bloc sales, 2023 is the timeline which developers will need to sell out by then. So base on 9707 units on yearly basis from 2020 onward, total projected units sold over next 4 years is 38,828.

Assuming all these units from the supply pipeline (and not considering the added supply from the ‘in between’ years) have been built from 2020 – 2023, that’s (48,260 – 38,828) at least 9,432 extra vacant completed units by 2023.
Based on URA’s 3rd Quarter Real Estate Stats Release, there are a current total of 372,085 completed private residential units (excluding EC) in Singapore. Add in the pipeline supply and that’s an estimated 423,049 total units by end 2023.
9,432 extra vacant units based on the above total units 423,049 means an approximate 2.23% increase in vacancy rates over these 4 years.
Hence we can be certain that an increase in vacancy rates (and most likely a decrease in pipeline unit supply) will follow till approximately 2023.
Considering the data from URA for 3rd quarter 2019, the vacancy rate stand at 6.1% currently which our prediction based on calculation from 2020, at 2.23% significantly lower than URA statistic. HDB upgraders is also group of home buyers to looking to sell off their MOP hdb flats and upgrade to private condominium especially stream of MOP flats are obtaining their 5 years MOP mark from year 2020.
Therefore, we are ascertain that the possibility of this ‘oversupply’ growing to extreme, and hence directly impacting demand (and reducing prices) is unlikely to happen.
If fact, we believe there will be substantial of HDB upgraders especially 81,018 hdb flats reaching MOP in the next 3 years. Likely new developments in OCR region will be benefit.