2) Wary of Over Supply in the Future
There has been aggressive bidding by developers both in en-bloc sale tenders and government land sales (GLS).
In the supply pipeline are around 20,000 units from GLS and en-bloc sites pending planning approval, on top of the 24,000 unsold units from projects with planning approval, according to the Urban Redevelopment Authority last month.
All buyers need to be mindful of the supply and demand dynamics and we have to ask ourselves whether demand will be able to match the big supply that’s coming onstream in the next few years.
This is expected to more than double the number of units available in the near term. If left unsold, this could result in a supply imbalance and weigh on the market.
“There’s a Chinese analogy referring to China’s property market where the flour can cost more than the bread,” said Economist Selena Ling from OCBC Bank.
The current en-bloc fever has contributed to aggressive land bids by property developers which reflect their bullish outlook, she added.
While the near-term demand-supply dynamics still look supportive, a ramp up in launches can be anticipated by 4Q18 going into 2019, she said.
Coupled with rising short-term interest rates, there may be room for caution, especially in light of potential downside growth risks due to the escalation of US-China trade tensions that could spill over to trade-dependent economies like Singapore, said Ms. Ling.