The rate of vacancies for flats are close to a ten year high and it looks as if this rate could continue to rise even further, to record levels that have not been witnessed since the financial crisis in Asia. In the 2nd Quarter close to 9.2% of flats stood vacant. This is the highest figure since the end of 2005, where rates were at 9.8%.
The main reason causing this situation is the record amount of homes being completed, with 19,941 homes in the private market coming to completion last year. Adding to this is a further 42,606 homes to be completed in the private sector for 2015 and 2016. Close to 96% of these are non-landed properties. The Government’s actions to cool down a residential market that was booming is partly to blame for this over supply.
New Flora Drive Condo by Hong Leong
As a result, we are seeing the demand for housing not growing in balance with the supply, and this means that rents will be under ongoing pressure. But what can be done about this?
Fewer developments sites are being made available by the Government, however units at sold plots are only entering the market stream 4 to 5 years ahead.
Where demand is concerned, the key to breathing life into these numbers is immigration. However, this tends to be a largely unpopular option.
The amount of individuals coming into Singapore is a figure that the Government is keeping a tight reign on. It is also viewed this policy is what is behind this rate of vacancy that is so high.
To make matters worse is a global economy that is slowing down.
Flora Drive Condo
A number of agents have been dealing with terminations in leases for ex-pats, and this is occurring in areas that are already fairing poorly, such as gas, oil and banking. The Ministry of Manpower also made a recent move that will greatly affect demand. Late last month it was announced that the salary bar would be raised for any foreigners who are working in the country in order to apply for visas for their family members. However, it has been noticed by those observing the market that signs are being seen of the Government taking a softer stance on this, or they are at least addressing the issue.
In an interview last month with Prime Minister Lee Hsien Loong, he shared that it would make sense economically to take in immigrants and foreign workers, even though on an emotional level this may be hard for some to accept. He further added that the best decision possible needed to be made for Singaporeans.
Hong Leong Flora Road Condo
It is in this area that decision made are impacting housing. The outlook will be bleak if a growth in demand does not occur. It is expected that the non-landed rate of vacancy could hit 10% by the end of 2015, continuing this cycle of hardship for developers and landlords alike.