Oversupply of private homes looms in the next 3 years

Annual supply of more than 13,000 units to outpace usual demand of 10,000, says UOB Kay Hian.

According to UOB Kay Hian, the huge supply of private residential homes is likely to outpace demand in the next three years with a supply of more than 13,000 units p.a compared with an average annual demand of 10,000 units.

However, the spillover demand as a result of the backlog of public housing shortage over the last decade will partially soak up the huge oncoming private residential supply, it added.

"While we expect prices to fall 8-10% over the next year as the market adjusts to the huge oncoming supply, prices are likely to remain stable over the medium to long term, supported by an extremely low interest rate environment, stable employment levels and growth in wages. We expect physical market prices to move in tandem with the GDP (3-5% pa growth) after the initial near term fall," said UOB Kay Hian.