New home completions could come in below URA estimates

The number of new private homes completed in the next five years could come in 21 per cent lower than official estimates, a new report by DTZ says.

Based on estimates released by the Urban Redevelopment Authority (URA) at end-2008, an average of 11,626 private housing units a year were scheduled for completion from 2009 to 2013.

This is 34 per cent higher than the annual average of 8,671 units in the past 10 years (1999 to 2008).

However, DTZ puts annual average completions between 2009 and 2013 at just 9,143 units a year - some 21 per cent under URA’s estimates.

This year, about 10,000 units will still be completed because they are already under construction, DTZ said. This will exert downward pressure on rents and prices.

‘Since Q4 2007, the number of private residential units in the pipeline has decreased every quarter, and more completion dates have been pushed back to 2012 and beyond in view of the weak property market outlook,’ DTZ says in its report.

And in Q4 2008, there were even more delays, as an increasing amount of the projected supply was pushed to 2013 or later with the rapid deterioration of the economy.

DTZ also pointed out that during the 1997-98 Asian financial crisis, projected completion supply at end-1997 for the four-year period from 1998 to 2001 was 42 per cent higher than actual completions. The over-projection was especially higher for the later three years (1999 to 2001), in the range of 50-75 per cent per year.

Similarly, during the 2001 economic slowdown following the crash of Internet stocks, projected completion supply at end-2001 was over-estimated by 7-21 per cent a year from 2002 to 2005, or about 13 per cent for the four-year period.

DTZ also said that based on the 10-year average annual take-up of 8,014 units, it will take five and a half years to clear the inventory of 44,661 unsold private residential units with and without pre-requisites at end-2008.

This figure has come down 9 per cent from the peak of 49,157 units in Q1 2008, but increased 1.6 per cent from Q3 2008 as take-up dipped to a record low in Q4 2008.

‘We expect take-up to remain low this year, between 5,000 to 6,000 units, with more sales likely to take place in the second half of the year as price expectations between buyers and sellers close,’ said DTZ’s senior research director Chua Chor Hoon.

Source: Business Times - 2 Feb 2009