Chart of the Day: Physical completion rate of homes exceeding population growth

What are developers thinking?

Singapore’s population is set to grow at around 75,000 individuals per year from 2014-2020.

An OCBC report says that including HDB, DBSS and EC completions,50.3k, 71.5k, and 37.2k homes will come into the physical supply in FY15, FY16, and FY17, respectively.

OCBC adds that assuming a conservative 3 persons per household, this trend translates to an incremental demand of around 25,000 physical homes per year, which clearly points to a physical oversupply situation ahead.

Here’s more from OCBC:

That said, the level of unsold pipeline held by developers (which forms the primary supply) is currently at 33k units. This is lower than the historical 10-year average of 41k units and is not excessively onerous. If we exclude units under consideration, to which the developers can exercise flexibility in terms of the pace of launch and construction, the situation appears less pessimistic.

While developers are likely to ease prices ahead to move inventory, we do not foresee a fire-sale situation – similarly because of the strong balance sheets for large developers.