Experts bust myths of Singapore's HDB market succumbing to supply glut

Demand will spread out, they say.

According to PropertyGuru, the Singapore government has been determined to ensure that first-home buyers are able to realise their dream of procuring a HDB unit to call their own, at an affordable price. To a large extent, they have succeeded in doing so.

In an effort to address the issue, the government has been committed to constructing over 90,000 HDB BTOs till 2016.

Here's more from PropertyGuru:

This injection of new supply is an increase of 50 percent – as compared to the number of units which were released for sale in the last three years. However, in spite of good intentions behind the announcement, there is a real risk of oversupply in the HDB BTO residential market as a consequence of the slow population growth of Singapore Citizens. Currently, the Singapore Citizen population increased at its slowest pace in nine years, reaching more than 3.3 million in 2013, up 0.65 percent from 3.29 million the year before.

If we were to plot the population growth rate against the proposed number of HDB BTOs planned to be built, we will see that by 2016, there is a possibility that the supply of housing will outstrip the total number of Singapore Citizens as a whole. This slowdown in population growth could lead to higher vacancy rates, placing a strain on public resources.

Application rates from first-time buyers for new BTO flats taking a tumble – from 2.4 in January 2013 to 1.3 in November 2013 – suggest that demand itself is already slowly being rectified. Does this, coupled with more than 28,000 HDB units planned for completion in 2014, signal a real danger that the HDB market is heading for a supply glut? According to analysts, this scenario is unlikely to occur.

Getty Goh, Director of real estate research firm Ascendant Assets said, “Even though 28,000+ flats due to be completed in 2014 may seem like a large number, if we take a long term view, the demand for housing will be spread out – given the fact that the government is trying to increase the overall population figure to 6.9 million by 2030.”

Alan Cheong, Head of Research for Savills, added, “New BTO flats are likely to be almost all taken up in the next few years to cover the backlog of demand. Most of these will go towards newly-formed families; therefore the seemingly large number of BTO flats expected for completion in 2014 and the near future is not a worrying issue.”

Citing alternative measures the government can take to alleviate concerns of oversupply, Christine Li, Head of Research and Consultancy for Orange Tee mentioned, “The government can simply accelerate the Selective En-bloc Redevelopment Scheme (e-SERS) and demolish more flats in the event that there is a risk. As public housing is mainly for owner occupation, it comes with a Minimum Occupation Period (MOP) to prohibit its sale until the buyer occupies it over a certain number of years. The government can have the option to extend the MOP further if an oversupply is imminent,” she said.