Record 13,400 homes to be completed next year

July 27, 2008
Record 13,400 homes to be completed next year
Rents expected to fall, especially in prime districts and East Coast.
Fiona Chan reports.

Next year is likely to be a bad one for landlords.

A bumper crop of newly completed homes is scheduled to flood the
market, making more apartments available for rent and pushing down
rents, which saw record rises last year.

And with lower rents, private home prices - which industry observers
say have reached their peak - may drop further, especially those in
the prime districts.

A massive 13,399 new private homes will be ready for occupation next
year. This is double the average in recent years and the most in a
single year, according to property consultancy CB Richard Ellis
(CBRE).

Official supply numbers show 10,500 completions next year and 11,800
the year after, but CBRE's analysis, based on construction progress
and delays, reveals more completions next year.

It expects this new supply to depress rents by 5 to 10 per cent on
average next year, coming on top of a global economic slowdown that
might lead firms to hire fewer expatriates, the main source of
tenants.

In the prime areas, rents could slide up to 15 per cent next year, on
top of a decline that has already begun this year, predicted CBRE.

Popular rental areas such as the East Coast and Orchard will be among
the worst hit as keen demand for homes there in recent years led
developers to build aggressively.

An 'alarming' 3,341 new homes will be completed in the East Coast
next year, double the number this year, CBRE said. Major projects in
the area, which covers Katong and Marine Parade to Bedok and Changi,
include the 562-unit One Amber and the 556-unit Casa Merah.

In the prime districts 9, 10 and 11, some 4,240 homes will be ready
in areas such as Orchard, Holland, River Valley, Tanglin and Newton.
RiverGate, with 545 units, is the biggest condominium scheduled to
open its doors.

Suburban areas will also see a large jump in finished homes next
year. In the north and north-west, for example, there will be 10
times more than this year.

But this is unlikely to result in a glut or lower rents as most
suburban home buyers intend to occupy their units.

Property experts warn that many major prime projects to be ready this
year and next are those that had attracted investors rather than
owner-occupiers, which means their units will add to the rental
supply.

'Some big condos in the downtown areas have a higher proportion of
investors,' said Mr Colin Tan of property firm Chesterton
International. These include the 1,111-unit Sail @ Marina Bay, which
will be fully completed by the end of this year, and the 312-unit
Clift in McCallum Road, expected next year.

'We don't even have to wait for the 14,000 homes next year; rents are
already moderating and should come down in the third quarter,' he
said, adding that landlords are lowering their asking rentals.

He cited the case of The Sea View in Amber Road, whose 546 units were
completed this year. 'I asked someone there, how are the rents? He
said: 'I'm not sure really, there's no demand'.'

This will be welcome news for renters, who have had to face ever-
increasing rents over the last two years.

Rents have shot up 60 per cent on average since 2006 and even doubled
in some places, thanks to an influx of expats and a shortage of
rental homes.

For example, in Cuscaden Residences in the Tanglin area, a typical
1,485 sq ft unit could fetch $9,200 in monthly rents last year, from
about $6,500 in 2005. This year, it has fallen to $8,100, according
to recent reports. Next year, it could fall by another 10 per cent to
$7,300, if CBRE's predictions come true.

Entrepreneur Sebastien Dechamps, 29, who came here from France three
years ago and started a website for expatriates, said high rents have
seen more expatriates moving away from the city to places in the
north and the east.

'The fall in rental prices is definitely good news. It might
encourage expats to move to the city, which is great because they can
put more vibrancy back into the city and into its nightlife,' he
said.

A fall in rentals generally leads to a fall in home prices for two
reasons: landlords, less able to service their mortgages, are willing
to let go of their units more cheaply, while would-be investors will
only pay as much as a home can fetch in rents.

The supply situation is not likely to improve beyond 2010: The latest
official data shows that apart from the 21,000 or so homes to be
completed over the next two years, there are another 20,000 homes
scheduled to be built in 2011.

But Savills Singapore's director of business development and
marketing, Mr Ku Swee Yong, is still optimistic.

He expects higher than average housing demand during 'the next few
years of growth', and believes that after accounting for demolitions
of collective sale estates, the 'net supply should be balanced by
demand'.