Fears of higher vacancy rates escalate

Residential projects due for completion next year are 2-3x more than usual.

"We retain our negative view on the Singapore residential sector as we continue to see a rising threat of vacancy with an acceleration in physical completions in 2013-15," said CIMB in a report.

Vacancy rates for non-landed private units had increased from 5.9% to 6.1% qoq in 3Q12 as take-up continued to lag physical completions.

URA estimates that completions will rise from 16.1k units in 2013 to 23.1k units in 2015, which according to CIMB is 2-3x more than the historical average occupancy rate of 8k units per year.

"This will be compounded by impending completions of HDB units following aggressive building in the last three years. Around 83% of local residents still
live in HDB flats. Incremental demand should also come under pressure from the Singapore government’s continuous reassessment of its liberal immigration
policies. PR conversions have tapered off, a glimpse of how tighter immigration is taking shape. Rising inventories against normalised population growth do
not augur well for future take-up, in our view. While prices remain at record highs on low interest rates, policy risks remain an overhang," it said.