Singapore could face a private housing supply crunch in the short term even though as many as 57,900 units are under construction or planned

Singapore could face a private housing supply crunch in the short term even though as many as 57,900 units are under construction or planned, says JP Morgan in a report.

Supply should ‘normalise’ in the next 12-18 months, says the investment bank, pointing out that 4,400 units were added to housing stock in just the first quarter of 2007.

But much of the supply will only kick in about one or two years from now. ‘Most of the inventory will be brought on-line over the next year or two for completion post-2010, with 16,800 private residential properties due in 2009.’

At end-2006, about 14,200 available units were unoccupied and a further 4,100 were due to be completed by this year-end.

‘These in total will yield 18,400 ready-to-occupy units to meet the demand from those who need a completed unit to occupy in 2007,’ says JP Morgan.

Its analysts, Christopher Gee and Joy Wang, point out that their estimates for the private housing pipeline do not include the supply from the government land sales programme, which could yield another 3,500 units. Nor do their figures take into consideration an estimated 16,000 units that could come up on the sites of projects sold en bloc.

JP Morgan says the government, which has over the past month made a number of cautionary statements about the excessive property price movements, can be expected to continue to back up those statements with supply-side initiatives.

But no official action to dampen demand - such as real property gains taxes - should be expected, it adds.

The analysts also point out that luxury home prices in Singapore are fast approaching those in Hong Kong. ‘Singapore’s luxury market prices are no longer such an apparent relative bargain as they were two or three years ago, especially in contrast to Hong Kong and some major cities around the world.’

Official estimates show that prices of uncompleted projects in the core central region climbed 46.3 per cent from the first quarter of 2004 to the first quarter of 2007.

JP Morgan has an ‘underweight’ rating on Singapore property stocks, saying prices already reflect ‘an optimistic outlook on further housing price increases’. It is keeping its ‘overweight’ calls on CapitaLand and GuocoLand, but has downgraded City Developments to ‘underweight’. Allgreen Properties and Wheelock Properties are also rated ‘underweight’.

Source: The Business Times, 12 July 2007