What is the housing stock needed to maintain stability? 27,000 units, says Huttons

By Lee Sze Teck,
Huttons Asia
/ EdgeProp Singapore |
In the private land sales market, activities picked up considerably after the circuit breaker with an estimated 10 sites launched for sale compared to two before (Photo: Samuel Isaac Chua/EdgeProp Singapore)
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SINGAPORE (EDGEPROP) - In the six months before the circuit breaker, from October 2019 to March 2020, average monthly new home sales were 765 units. In the six months after the exit from the circuit breaker, and transition to Phase Two, new home sales spiked to more than 1,000 units per month. (See also: Fear of missing out and talk of cooling measures nudge new home sales up 32.2% in Jan 2021)
During Phase Three, new home sales picked up pace to an average of 1,211 units per month. New home sales slowed down to 882 units per month when the country returned to Phase Two (Heightened Alert).
Estimated sales - EDGEPROP SINGAPORE

Supply has not caught up with demand

No one anticipated the strong run up in sales. In fact, the number of private residential dwelling units on the Confirmed List of the Government Land Sales (GLS) Programme for 2H2020 was reduced to 755. It was apparent subsequently that a bump up in land supply is necessary to satisfy the thirst in the market. The government gradually increased that to 1,015 dwelling units in 1H2021 and 1,625 in 2H2021.
In the private land sales market, activities picked up considerably after the circuit breaker with an estimated 10 sites launched for sale compared to two before. As of July 2021, more than 20 sites with the potential to build more than 1,000 dwelling units have been launched for sale. Four sites were reported to be sold in 2021. The private market has been quicker to respond.
The strong new home sales in the first six months of 2021 have seen the unsold inventory in the market dwindling to a record low of 19,409 units as of 2Q2021. In 1H2021, developers sold 6,459 units or 1,077 units per month, the highest half-yearly sales since 2013.
Government land sales - EDGEPROP SINGAPORE
Breaking down the unsold inventory by market segment, there were 6,861 unsold units in the Core Central Region (CCR), 6,708 unsold units in the Rest of Central Region (RCR), and 5,840 unsold units in the Outside Central Region (OCR).
The question is: How long will it take to sell out every single unit in each market segment?
If the annual new home sales rate from July 2020 to June 2021 is assumed to be the sales rate for the next 12 months, it will take 1.5 years to sell out the unsold inventory of 19,409 units. The CCR has seen a strong pick-up in demand since 2019 and needs only 3.5 years to clear out the existing inventory. The situation is dire in the RCR and OCR where it only needs 1.2 years to sell out all.
Over the period from 2010 to 2020, it has taken between 1.5 and 4.3 years to clear the inventory of unsold units. On average, it has been around 2.7 years.
At the present moment, the market is not seeing sufficient injection of new supply to maintain a healthy balance. In 2H2021, an estimated 2,967 units or 495 units per month will be launched for sale. The average monthly demand in 1H2021 is 1,077 units. Even if sales were to slow to the pre-circuit breaker level of 700 to 900 units per month for 2H2021, the new supply of 495 units per month is not enough and the unsold inventory will go down further.
In 2022 and beyond, the estimated new supply is around 6,611 units. This is on a par with the new home sales in 1H2021, but way below the annual new home sales from 2018 to 2020. Unsold inventory will be whittled down even more in 2022.


It is evident that the market needs more supply of land. The current level of supply under the GLS Programme is not sufficient. Interest in the en-bloc market has been lukewarm despite the varied options available. (See: See potential condos with en bloc calculator)
It takes considerably more time to launch a collective sale site as it is not an easy task to persuade owners to sell. The Government announces a new slate of land parcels for sale once every six months. In normal circumstances, that will suffice, but not now.
The Government can consider launching a supplementary GLS supply now. It has not been done this before but it should not be ruled out. After all, supplementary budgets have been announced during the pandemic.
The RCR and OCR need more attention because the unsold inventory in these two regions will be totally wiped out in 1.2 years based on the past 12 months’ new home sales rate. For the en bloc market, more efforts should be channelled towards these two regions as well.

How much supply is sufficient as a buffer?

Past experience indicates that it takes an average of 2.7 years to sell out. The average annual new home sales over the period of 2010 to 2020 was around 12,000 units. The past two years have seen demand hovering around 10,000 units. Using 10,000 units and 2.7 years, a comfortable buffer of 27,000 units is proposed to maintain price stability in the market.
Lee Sze Teck, senior director (research), Huttons Asia

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