More Empty Homes On The Horizon

The housing vacancy rate in Singapore may hit a record high of 9.8 percent in 2016 as private home completions rise from 19,900 units in 2015 to 20,900 by the end of next year, according to media reports citing a Barclays report.

Aside from the private home supply glut, the occupancy rate will also be pressured by growing public housing completions over the coming quarters.

Barclays expects public housing completions to increase from 28,000 units in 2014 to 26,000 this year and 20,000 by end-2016.

“As a result, the overall vacancy rate increased to 7.2 percent at the end of Q1 2015. Island-wide private home rents have fallen five percent from their Q3 2013 peak, while suburban rents have fallen six percent from their Q2 2013 peak,” the report said.

History shows that prices tend to drop significantly when the vacancy rate exceeds eight percent.

During the Asian financial crisis between Q2 1996 and Q4 1998, for instance, private home prices plunged 45 percent as the vacancy rate climbed from 6.2 percent to 9.7 percent.

“With an annual private home demand of only 15,000 units – we estimate 55 percent of total annual household formation of 26-27,00 to live in or enable upgrades to private homes – we estimate the vacancy rate could reach 9.8 percent by 2016E,” noted Barclays.


Romesh Navaratnarajah


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