An anticipated surge of new private homes may come sooner than officially forecast, according to a report by property consultancy International Property Advisor (IPA).
In its November estimates, it said 14,000 new homes might be completed next year, significantly more than the 12,043 new home completions predicted by the Urban Redevelopment Authority (URA) in its third-quarter property forecast.
The predictions for 2013 follow a similar trend, with IPA’s estimate of 17,000 homes far ahead of the 12,882 new homes anticipated by the URA.
IPA chief executive Ku Swee Yong said his forecasts are based on the fact that developers often complete projects within three years, shorter than the estimated legal completion period of up to five years developers are bound by. A faster completion date translates to speedier payments from buyers.
“Buyers make progress payments at each stage of completion so the quicker the job gets done, the sooner the developers can get paid,” said Mr Ku.
While the shorter wait for homes will be good news for buyers who intend to occupy the new units, Mr Ku cautioned that it could turn out to be a double-edged sword for investors.
“ As an investor, yes, you get the apartment earlier, but you might have bought it anticipating a stronger rental demand because fewer homes were expected to be completed within the same year.”
“It could mean you are entering a market that is very congested with new apartments, which may severely affect the rental demand for your investment property.”
“Last quarter, a project may have launched for $900psf with a 90% sell-out rate in two months. But developers might be led to lower their prices in order to achieve the same sales pace next year.”
Mr Ku said the market might experience a 5% to 10% dip in the prices of new and resale private residential property within the next year.
Source: The Straits Times