Private residential property prices to plunge 20% by 2015

Vacancy rates will hit a record-high 10%.

Singapore’s private residential property prices reported steady declines in September, but prices are expected to plunge by 20% in 2015, with vacancy rates expected to hit a record-high 10% in 2016.

According to Barclay’s, the drop is in view of market expectations of rising interest rates, and will coincide with peak supply as unsold inventory rises across both high and low-end segments.

“We expect both volumes and prices to slide given: 1) the ongoing government curbs, 2) looming oversupply, and 3) rising interest/mortgage rates in 2H15E. We maintain our negative stance on the Singapore residential sector. We see an oversupply of private housing properties and we expect prices to fall 20% by 2015, in view of market expectations for interest rates to rise, coinciding with peak supply and our assumption that the vacancy rate could reach a record 10% by 2016,” noted the report.

Here’s more from Barclay’s:

The Urban Redevelopment Authority’s flash data for 3Q14 indicates that both private and public home prices continued to slip in 3Q14 for the fourth and fifth consecutive quarters respectively.

Private home prices fell 0.6% q/q and -3.8% y/y. This is the fourth straight decline, albeit a slight deceleration, after -1.0% q/q in 2Q14, -1.3% q/q in 1Q14 and -0.9% q/q in 4Q13, bringing the cumulative decline to 3.8% since the peak in 3Q13. Private home prices are still 56% above the last trough in 2009.

Public housing continued to fall for the fifth straight quarter by 1.6% q/q, vs -1.4% in 2Q14, for a cumulative slide of 6.8% from the peak. 

August sales fell 15% m/m and 43%y/y to 432 units, the lowest monthly figure since December 2013, bringing year-to-August sales to 5,350 units, down 52% y/y from 11,188 units in 8M13. 

We believe the government will only start unwinding measures when prices fall a cumulative steeper 10-15%, perhaps in mid-2015.