Property market sentiment reaches new high, but fears of possible over-supply loom

/ EdgeProp
January 24, 2018 9:30 PM SGT
The 4Q2017 NUS-REDAS Real Estate Composite Sentiment Index reached a new high following eight consecutive quarters of increases since 4Q2015. The index is an indicator for the overall real estate market sentiment. The composite sentiment score in 4Q2017 went up to 6.9 from 6.6 in the previous quarter.
Industry sentiment for the prime residential and suburban residential sectors led the recovery in in 4Q2017. The office sector also showed relatively strong performance, while hotel and service apartment sector exhibited a clear sign of recovery. The prime retail sector was still the worst performing and respondents are still pessimistic on retail sectors.
Based on a survey of senior executives at REDAS member firms, rising inflation/interest rates, government intervention, and excessive supply of new property launches were identified as the top three potential risks that could adversely impact market sentiment in the next six months.
Compared to 26% in 3Q2017, 60% of respondents were concerned about government intervention, citing the implementation of the Pre-Application Feasibility Study for new en bloc projects. Additionally, 40% of all respondents and 50% of developers surveyed expect more changes of rules for en bloc developments.
About 19% of the surveyed developers expect residential property prices to substantially increase in the next six months and just 9% expect prices to remain unchanged.
65% of all respondents and 69% of the developers foresee a serious over-supply over the next one to two years. 60% of respondents indicated that aggressive bidding by developers is a possible cause for over-supply.