Demand for housing in Singapore – is it sustainable?

By Getty Goh

One of the local media reporters recently asked me if I thought that the demand for housing in Singapore was sustainable. What prompted her question was the fact that the government seems to be launching wave after wave of BTO flats as well as land parcels for private residential development. As a potential home owner herself, she wondered if there would eventually be an oversupply of residential properties in Singapore. In this article, I shall look at sustainability from two perspectives – one is demand for homes and the other is from the angle of price.

Is there actual demand – the “6 million” question

In one of the recent interviews, Singapore’s Prime Minister, Mr Lee Hsien Loong was asked what he thought the target population for Singapore should be, to which he replied, “six million or so should not be a problem”.

At present, Singapore’s population is just over  five million. To accommodate the increase in population of about one more million residents or so, dwelling units (which includes HDB flat and private properties) would be needed. So exactly how many more dwelling units are needed?

According to the Department of Statistics the average household size in 2011 is 3.5. If this trend remains unchanged, to support a population of  six million, the number of dwelling units needed is about 1.71 million in total.

Based on URA, the total number of available private properties in 2012Q2 is 273,050. In terms of public flats, accordingly to HDB’s latest annual report, the total number of flats under HDB’s management is 901,971 (as of 31 Mar 2011). Collectively, the total number of dwelling units works out to be about 1.18 million.

This means that we are still short of about 500,000 units or about 30 percent short of what is eventually needed. Looking at the figures, it would be safe to conclude that the demand for residential properties would continue to be there in the mid- to long-term, as long as the population target of  six million remains. If the population target goes up, the number of properties needed would correspondingly increase.

Are prices sustainable?

Although we expect property demand to be sustainable, it is a different matter with respect to property prices. While new HDB and Executive Condominium units are still very affordable as they are heavily regulated, the same cannot be said for the private property market.

Using data from URA as well as the Department of Statistics, we found that the increase in salary from 2004 to 2011 was about 55.12 percent. In comparison, the average increase in nominal prices was about 73.59 percent. From this simple analysis (see Figure 1), we can observe that median private property prices had increased at a faster rate as compared to median household income in the past eight years. At this juncture, some properties could already be unsustainably priced.

 Figure 1

2004

2011

% change

Core Central region

S$835.69

S$1,506.37

80.25

Rest of Central region

S$599.05

S$983.39

64.16

Outside Central region

S$458.78

S$809.15

76.37

Median monthly household income

S$4,066.00

S$6,307.00

55.12

 Source:  URA, Department of Statistics and Ascendant Assets Pte Ltd

Conclusion

Since 2011, I have highlighted that today’s property prices are the result of excess liquidity and price appreciation has grown out of sync with actual demand. With three rounds of quantitative easing, it is little wonder that property prices have reached an unsustainably high point. Prices are also unlikely to go up further once the quantitative easing stops.

About the Author:
Getty Goh is a director at Ascendant Assets Pte Ltd and MIGO Development Pte Ltd. He is a certified real estate trainer by the Council of Estate Agents, a government statutory board, and gives regular training at the Singapore Institute of Surveyors and Valuers (SISV). He is also frequently invited to share insights on the Singapore property market at public seminars.


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  1. Hellothere says:

    The median household does not purchase the median private property. Try running the same analysis with the incomes of the 90th or 95th percentile.

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