In Focus
RESIDENTIAL PROPERTY | Staff Reporter, Singapore

Here are 3 reasons why property prices will likely get a boost next year

Improving GDP forecasts is one.

The Singapore economy has been seeing positive signs lately which could lead to home prices going on an upward trajectory starting next year.

With GDP forecasts treading around 2.3% and 2.8% for this year and the next, home prices would likely get a boost, a report by Morgan Stanley said.

Another reason is the rising volume of sales seen so far this year. The research firm said this year would see sellers bring prices to the point where latent demand kicks in, and volumes rise a substantial 20%, marking the final year of price declines.

The increase in volume will be seen not just from land sales from the government but also from the private sector.

Another reason for the inflection in prices is the easing of property curbs.

"The beginning of a rollback in earlier property curbs shows that we are far enough along the down cycle for the government to intervene. We believe this improves buyer sentiment as it is a sign we are nearing the bottom, even if there might be a little bit of a way to go," Morgan Stanley said.

Finally, the improving demand-supply dynamics could indicate a forthcoming turnaround in the sector as supply has peaked, demand is surprising on the upside, and unsold inventory is at all-time lows.

For the past three years, private residential supply has added a record around 20k units per year, or 6% p.a. to existing stock, twice the historical average since 1990. And despite a 20% rise in private housing stock in the past three years, vacancies grew just 2ppt to 8.4% in 2016, as 80% of the additional stock was occupied.

"We believe this is partly due to still steady growth in Employment Passes - a 190k-strong foreign workforce that earn more than $3,600/month," the report noted.

In addition, a growing number of single person households - which comprised one in eight Singapore resident households in 2010 - has been a key contributor to housing demand.
Morgan Stanley forecasts that by 2030, one in five households will be occupied by just one person.

The research firm said the capacity to buy is strong as on aggregate Singaporean households are in a net cash position. Furthermore, unsold inventory levels are at historic lows comprising around 20,000 units, of which only 2,000 are completed.

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