Singapore's residential supply glut exacerbated by unyielding immigration stance: report

Who will buy homes without foreigners and PRs?

The oversupply in Singapore's private residential property market is being aggravated by the government's tight stance on immigration, a report by BNP Paribas said.

Philip McNicholas, ASEAN Economist at BNP Paribas Singapore, said that previous spurts in the foreign & permanent resident population have been key drivers of Singapore’s economic growth.

“Judging by the strong correlation between the growth of Singapore’s foreign population and the private property market, such policies have weighed heavily on prices. The foreign population drives marginal property demand in the city-state, be it via purchases or rentals. As well as boosting the labour force, population growth has driven a strong expansion in residential real estate investment, which became the dominant driver of gross fixed capital formation for the first time in 2014,” McNocholas said.

He added that tighter immigration policies have come at a time when new units are entering the market at an unprecedented pace.

“The Urban Redevelopment Authority (URA) estimates nearly 24,000 units will be added to the private nonlanded property stock in 2015. Assuming occupancy rates for this fresh supply remain near the historical average of 85%, the vacancy rate will rise to 10% at end-2015 (Chart 8). This would be the highest level since 2005, heralding further downward pressure on both prices and rents,” he said.